EX-99.1 2 a2239156zex-99_1.htm EX-99.1

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TABLE OF CONTENTS
INDEX TO COMBINED FINANCIAL STATEMENTS THE MALLINCKRODT INC. BUSINESS OF PARENT


Exhibit 99.1

[                        ], 2019

Dear Mallinckrodt plc Shareholder:

        Previously, we announced plans to spin off a new company, which we have named Mallinckrodt Inc., that will hold our Specialty Generics/Active Pharmaceutical Ingredients ("API(s)") business. The separation will create two independent publicly traded companies—one focused on innovative specialty pharmaceutical brands, the other concentrated in complex generic products and API manufacturing—each positioned to optimize future success as they pursue independent growth strategies.

        Both of these companies have businesses with industry-leading products and services. Following the separation, Mallinckrodt plc ("Parent"), which we currently intend to rename Sonorant Therapeutics plc as part of the separation, will continue to be a global developer, manufacturer and distributor of specialty branded pharmaceutical products. Mallinckrodt Inc. will be a leading supplier of complex generic pharmaceuticals and APIs. As independent, publicly owned companies, Parent and Mallinckrodt Inc. each will be able to pursue and focus on its own strategic and operational plans, including setting an optimal level of investment in research and development and in the operation and expansion of its businesses, and creating a business-appropriate capital structure. We anticipate that the separation will improve the ability of each of Parent and Mallinckrodt Inc. to invest in its business, pursue strategic transactions, attract and retain employees (by providing equity compensation more directly tied to business results), and enhance market recognition of each company's business with investors.

        The separation will provide current Parent shareholders with ownership interests in both Parent and Mallinckrodt Inc. The distribution of shares of Mallinckrodt Inc. to Parent shareholders is subject to certain conditions. It is intended that, for U.S. federal income tax purposes, the distribution generally will be tax-free to Parent shareholders.

        As a result of the separation, each Parent shareholder will receive one share of Mallinckrodt Inc. common stock for every [                        ] Parent ordinary shares held on [                        ], 2019, the record date for the distribution, with cash being paid in lieu of fractional shares. You do not need to take any action to receive shares of Mallinckrodt Inc. common stock to which you are entitled as a Parent shareholder. You do not need to pay any consideration or surrender or exchange your Parent ordinary shares.

        We encourage you to read the attached information statement, which is being made available to Parent shareholders who hold ordinary shares on [                        ], 2019. The information statement describes the separation in detail and contains important business and financial information about Mallinckrodt Inc.

        We believe the separation is a positive next step for our businesses and our shareholders. We remain committed to working on your behalf to continue to build long-term value.

Sincerely,

[                                    ]

Mark Trudeau
President and Chief Executive Officer
Mallinckrodt plc


LOGO

[                        ], 2019

Dear Future Mallinckrodt Inc. Shareholder:

        On behalf of the entire Mallinckrodt Inc. team, we welcome you as a future shareholder.

        We are a company that develops, manufactures, markets and distributes complex generic pharmaceuticals and APIs. Our complex generic products are predominantly sold via major wholesalers and retail drug store chains. We use our active pharmaceutical ingredient products in the manufacturing of our generic pharmaceuticals and also sell them to other pharmaceutical companies.

        As an independent company, we plan to pursue our own strategic and operational plans to drive more value by setting an optimal level of investment in research and development, strategic transactions, and in the operation and expansion of our business. We anticipate that this will improve our ability to develop innovative new products, attract and retain employees and enhance our market recognition with investors. Our focused management team is highly motivated to make a difference, as we enhance value for our customers and shareholders.

        I encourage you to learn more about us and our strategic initiatives by reading the attached information statement. We intend to apply for authorization to list our common stock on the New York Stock Exchange under the symbol "MNK."

        We look forward to meeting the needs of our customers and the patients they serve, as well as rewarding our shareholders, as we begin a new and exciting chapter for our company.

Sincerely,

[                                    ]

Matthew K. Harbaugh
President and Chief Executive Officer
Mallinckrodt Inc.


Information contained herein is subject to completion or amendment. A Registration Statement on Form 10 (File No. 001-38845) relating to these securities has been filed with the United States Securities and Exchange Commission under the United States Securities Exchange Act of 1934, as amended.

Preliminary and Subject to Completion, dated June 27, 2019

INFORMATION STATEMENT

Mallinckrodt Inc.

        This information statement is being furnished in connection with the distribution of shares of common stock of Mallinckrodt Inc., which will hold the Specialty Generics/Active Pharmaceutical Ingredients business of Mallinckrodt plc ("Parent"), to Parent's shareholders.

        For every [            ] ordinary shares of Parent held of record by you as of the close of business on [                    ], 2019, the record date for the distribution (the "record date"), you will receive one share of Mallinckrodt Inc. common stock. You will receive cash in lieu of any fractional shares of Mallinckrodt Inc. common stock which you otherwise would have received after application of the above ratio. We expect shares of our common stock to be distributed to you on [                    ], 2019. We refer to the date of the distribution of shares of our common stock as the "distribution date." As discussed under "The Separation—Trading Between the Record Date and Distribution Date," if you sell your ordinary shares of Parent in the "regular-way" market after the record date and before the distribution date, you also will be selling your right to receive shares of Mallinckrodt Inc. common stock in connection with the separation.

        The distribution is intended to be generally tax-free to Parent shareholders for U.S. federal income tax purposes. The distribution is subject to certain conditions, as further discussed under "The Separation—Conditions to the Distribution."

        No vote of Parent's shareholders is required in connection with the separation. Therefore, you are not being asked for a proxy, and you are requested not to send us a proxy, in connection with the separation. You do not need to pay any consideration, exchange or surrender your existing ordinary shares of Parent or take any other action to receive your shares of Mallinckrodt Inc. common stock.

        There is no current trading market for shares of our common stock, although we expect that a limited market, commonly known as a "when-issued" trading market, will develop on or shortly before the record date for the distribution, and we expect "regular-way" trading of shares of our common stock to begin on the first trading day following the completion of the separation and distribution. We intend to apply for authorization to list our common stock on the New York Stock Exchange ("NYSE") under the symbol "MNK." It is currently intended that Parent will be renamed "Sonorant Therapeutics plc" and will change its ticker symbol from "MNK" to "SRTX."

        We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"), and, as such, we are allowed to provide (and have provided) in this information statement more limited disclosures than those that would be required of a registrant that does not so qualify. In addition, for so long as we remain an emerging growth company, we may also take advantage of certain limited exceptions from investor protection laws, such as the Sarbanes-Oxley Act of 2002, as amended (the "Sarbanes-Oxley Act"), and the Investor Protection and Securities Reform Act of 2010, for limited periods. See "Summary—Emerging Growth Company Status."

        In reviewing this information statement, you should carefully consider the matters described under "Risk Factors" beginning on page 21.

        Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.

        This information statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.

        This document is not a prospectus within the meaning of the Prospectus Directive (2003/71/EC) (as amended) and the Prospectus Regulation 2017/1129. No offer of securities to the public is made, or will be made, that requires the publication of a prospectus pursuant to the above directive or any transposing instrument thereof. This document has not been approved or reviewed by or registered with any competent authority or regulatory authority in the European Economic Area. This document does not constitute investment advice or the provision of investment services within the meaning of the Markets in Financial Instruments Directive (2014/65/EU). Neither Parent nor Mallinckrodt Inc. is an authorized investment firm within the meaning of the Markets in Financial Instruments Directive (2014/65/EU) or any transposing instrument thereof and the recipients of this document should seek independent legal and financial advice in determining their actions in respect of or pursuant to this document.

        The date of this information statement is [                    ], 2019.

        This information statement will be made publicly available on or about [                    ], 2019, and notice of this information statement's availability will be first sent to Parent's shareholders on or about [                    ], 2019.



TABLE OF CONTENTS

 
  Page  

QUESTIONS AND ANSWERS ABOUT THE SEPARATION

    1  

INFORMATION STATEMENT SUMMARY

    8  

SUMMARY HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA

    18  

RISK FACTORS

    21  

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

    48  

DIVIDEND POLICY

    49  

CAPITALIZATION

    50  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

    51  

SELECTED HISTORICAL COMBINED FINANCIAL DATA

    57  

BUSINESS

    58  

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    83  

MANAGEMENT

    102  

EXECUTIVE COMPENSATION

    111  

DIRECTOR COMPENSATION

    116  

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

    117  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    118  

THE SEPARATION

    119  

OUR RELATIONSHIP WITH PARENT FOLLOWING THE DISTRIBUTION

    127  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

    131  

DESCRIPTION OF MATERIAL INDEBTEDNESS

    135  

DESCRIPTION OF OUR CAPITAL STOCK

    136  

WHERE YOU CAN FIND MORE INFORMATION

    141  

INDEX TO COMBINED FINANCIAL STATEMENTS

    F-1  


Presentation of Information

        Except as otherwise indicated or unless the context otherwise requires:

    The information included in this information statement about Mallinckrodt Inc. assumes the completion of all of the transactions referred to in this information statement in connection with the separation.

    References in this information statement to "Mallinckrodt Inc.," "we," "us," "our," "our company" and "the company" refer to Mallinckrodt Inc., a Delaware corporation, and its combined subsidiaries.

    References in this information statement to "Parent" refer to Mallinckrodt plc, a public limited company incorporated in Ireland, and its consolidated subsidiaries, including Mallinckrodt Inc. and its combined subsidiaries prior to completion of the distribution. It is currently intended that Mallinckrodt plc will be renamed Sonorant Therapeutics plc. Throughout this information statement, for purposes of simplicity, Mallinckrodt plc (whether before or after it is renamed Sonorant Therapeutics plc) is referred to as "Parent."

    References in this information statement to the "Mallinckrodt Inc. Business" refer to Parent's Specialty Generics/Active Pharmaceutical Ingredients business and certain other assets and liabilities of Parent, in each case as further described herein.

    References in this information statement to the "separation" refer to the separation of the Mallinckrodt Inc. Business from Parent's other businesses and the creation, as a result of the

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      distribution, of an independent, publicly traded company, Mallinckrodt Inc., to hold the assets and liabilities associated with the Mallinckrodt Inc. Business from and after the distribution.

    References in this information statement to the "distribution" refer to the dividend on Parent ordinary shares outstanding as of the close of business on the record date that will be satisfied by Mallinckrodt Inc.'s issuance of shares of our common stock to the persons entitled to receive the dividend.

    References in this information statement to Mallinckrodt Inc.'s historical business and operations refer to the business and operations of the Mallinckrodt Inc. Business as it was historically managed as part of Parent prior to completion of the separation.

    References in this information statement to "dollar" or "$" refer to the U.S. dollar.


Trademarks and Trade Names

        We own or have rights to use the trademarks and trade names that we use in conjunction with the operation of our business. One of the more important trademarks that we own or have rights to use that appears in this information statement is "Mallinckrodt", which is a registered trademark or the subject of pending trademark applications in the U.S. and other jurisdictions. Solely for convenience, we only use the TM or ® symbols the first time any trademark or trade name is mentioned. Such references are not intended to indicate in any way that we will not assert, to the fullest extent permitted under applicable law, our rights to our trademarks and trade names. Each trademark or trade name of any other company appearing in this information statement is, to our knowledge, owned by such other company.

ii



Use of Certain Terms

        The following is a list indicating the pages of this information statement on which certain terms that we use in this information statement are defined:

AAA

  F-25

ADHD

  9

Amitiza

  120

ANDA

  26, F-40, F-62

AOC

  80, F-41, F-62

API(s)

  8, 58, F-7, F-50

ASC 606

  F-16

ASC 718

  111

ASU

  F-9, F-15

AUS

  81, F-42, F-63

cGMP

  63

CIDs

  77, F-38

CMDS

  88, F-44

CMOs

  71

CMS

  70

CO Site

  81, F-42, F-63

Code

  3

combined financial statements

  18

company

  i, 8

Company

  83, F-2, F-7, F-50

Computershare

  2

Cooperating Parties Group

  80, F-41, F-62

Covidien

  40, F-22

Covidien Share Plans

  F-32

CPG

  80, F-41, F-62

CSA

  22, 67

DAGs

  75

DEA

  9, 60, F-39

DGCL

  46, 137

DHHS

  64

distribution

  ii, 8

distribution date

  Cover

DOJ

  30, F-38, F-61

dollar(s)/$

  ii, 8

DTC

  2

EDNY

  78

EE/CA

  81, F-42

EPA

  34, 64, 80, F-41, F-62

ER

  89

ERLA

  66

ESPP

  F-33

Exchange Act

  16

FASB

  F-15, F-52

FCPA

  33, 69

FDA

  9, 60

FFDCA

  30, 64

FFS

  80, F-41, F-62

financial statements

  F-2

GAAP

  18, F-7, F-50

GCP

  64

General Dynamics

  81, F-42, F-63

generally accepted auditing standards

  F-2

generic exclusivity

  65

GILTI

  F-19

GLP

  64

Government Agencies

  81, F-42, F-63

Guerbet

  F-44

HCPs

  66

Healthcare Reform Act

  68

IBAM

  97, F-44

IFRS

  F-15

IMC

  81, F-42, F-63

interested shareholder

  139

IRS

  42

Jazz

  79, F-40

JOBS Act

  Cover

Lutathera

  F-25

Mallinckrodt Inc.

  i, 8

Mallinckrodt Inc. Business

  i, 8

MD Complaint

  79, F-40, F-61

MD Order

  79, F-40, F-61

MDL

  73, F-38, F-60

Medicare Part D

  68

Methylphenidate ER

  F-24

Millsboro Site

  81, F-42

MOA

  78, F-39

named executive officer

  111

NDAs

  64

NEO

  111

NYSE

  Cover

OCC

  80, F-41, F-62

OIG

  33, 69

Orange Book

  65, 79, F-40, F-61

OSA

  22, 78, F-39, F-61

our

  i, 8

our company

  i, 8

Paragraph IV certification

  30

Parent

  Cover, i, 8, F-7, F-50, F-2

Parent Share Plans

  F-32

PCAOB

  F-2

Piramal

  96, F-44

PRPs

  81, F-42, F-63

R&D

  63, F-8, F-51

record date

  Cover

REMS

  61, 66

RI/FS

  80, F-41, F-62

RICO

  21, 73, F-38, F-60

River

  80, F-41, F-62

RLD

  65

ROD

  80, F-41, F-62

SAB

  F-17

Sarbanes-Oxley Act

  Cover

SEC

  3

Securities Act

  16, 44

separation

  i, 8

separation and distribution agreement

  14

separation-related agreements

  15

SG&A

  F-8, F-51

Shire

  79, F-40

SOM

  67

tax opinion

  5

TCE

  81, F-42

TCJA

  87, F-17, F-19, F-53

Texas MDL

  75

three months ended December 25, 2015

  8, 83

three months ended December 30, 2016

  8, 83, F-7

TIRF

  66

TIRF REMS Access Program

  66

TMC

  76

Topic 842

  F-52

transition period

  111

U.K.

  96, F-20

U.S.

  F-7, F-50

U.S. Holder

  133

U.S. Tax Reform

  F-19

us

  i, 8

USAO

  78, F-39, F-61

UTB

  55

we

  i, 8

Xartemis XR

  F-25

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QUESTIONS AND ANSWERS ABOUT THE SEPARATION

What is Mallinckrodt Inc. and why is Parent separating the Mallinckrodt Inc. Business and distributing Mallinckrodt Inc.'s shares of common stock?

  Mallinckrodt Inc. was incorporated as a Delaware corporation on January 18, 2019 for the purpose of holding the Mallinckrodt Inc. Business following the separation. The separation of the Mallinckrodt Inc. Business from Parent and the distribution of Mallinckrodt Inc. shares of common stock to Parent shareholders are intended to provide you with equity investments in two separate companies that will each be able to focus on its respective business. We expect that the separation will result in enhanced long-term performance of each business for the reasons discussed in "The Separation—Background" and "The Separation—Reasons for the Separation."

Why am I receiving this document?

 

Parent is making this document available to you because you were a holder of ordinary shares of Parent on the record date of [                    ], 2019, and are entitled to receive one share of Mallinckrodt Inc. common stock for every [            ] ordinary shares of Parent that you held at the close of business on the record date. We will not issue fractional shares in the distribution; you will receive cash in lieu of any fractional shares of Mallinckrodt Inc. common stock which you otherwise would have received after application of the above ratio. This document will help you understand how the separation will affect your investment in Parent and your investment in Mallinckrodt Inc. after the separation.

How will the separation work?

 

Currently, all of Mallinckrodt Inc.'s issued shares of common stock are held legally and beneficially by Parent. Prior to the transfer by Parent to us of the Mallinckrodt Inc. Business, we will have no operations other than those incidental to our formation and in preparation for the separation. Parent will transfer the Mallinckrodt Inc. Business to us, in return for which, among other things, we will issue shares of our common stock to Parent ordinary shareholders, pro rata to their respective holdings. For the purposes of Irish law, this will be treated as Parent having made a dividend in specie, or a non-cash dividend, to its ordinary shareholders. In connection with these transactions, we will acquire the shares of our common stock held legally and beneficially by Parent for no consideration and cancel those shares. Immediately following the distribution, the persons entitled to receive shares of Mallinckrodt Inc. common stock in the distribution will own all of our outstanding shares of common stock.

Why is the separation of Mallinckrodt Inc. structured in this manner?

 

Parent believes that a distribution of shares of Mallinckrodt Inc. common stock that is generally tax-free to Parent shareholders for U.S. federal income tax purposes is an efficient way to separate the Mallinckrodt Inc. Business in a manner that will enhance the ability of each of Parent and Mallinckrodt Inc. to execute its long-term business strategies.

What is the record date for the distribution?

 

The record date for the distribution will be [                    ], 2019.

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When will the distribution occur?

 

We expect the distribution of shares of our common stock to occur on [                    ], 2019, to holders of record of ordinary shares of Parent as of the close of business on the record date.

What do shareholders need to do to participate in the distribution?

 

Shareholders of Parent as of the close of business on the record date will not be required to take any action to receive shares of Mallinckrodt Inc. common stock in the distribution, but you are urged to read this entire information statement carefully. No shareholder approval of the distribution is required. You are not being asked for a proxy. You do not need to pay any consideration, exchange or surrender your existing ordinary shares of Parent or take any other action to receive your shares of Mallinckrodt Inc. common stock. The distribution will not affect the number of outstanding ordinary shares of Parent, although by virtue of the separation it is expected to affect the market value of the outstanding ordinary shares of Parent.

Will I receive physical certificates representing shares of Mallinckrodt Inc. common stock following the separation?

 

No. Following the separation, we will not issue physical certificates representing shares of our common stock. If you own ordinary shares of Parent as of the close of business on the record date, Parent, with the assistance of Computershare Trust Company, N.A. ("Computershare"), the distribution agent, will electronically distribute shares of common stock to you in book-entry form by way of registration in the "direct registration system" (if you hold the shares in your own name as a registered shareholder) or to your bank or brokerage firm on your behalf or through the systems of the Depository Trust Company ("DTC") (if you hold the shares through a bank or brokerage firm that uses DTC). Computershare will mail you a book-entry account statement that reflects your shares of Mallinckrodt Inc. common stock, or your bank or brokerage firm will credit your account for the shares of Mallinckrodt Inc. common stock. See "The Separation—When and How You Will Receive Shares of Common Stock of Mallinckrodt Inc. in the Distribution."

How many shares of Mallinckrodt Inc. common stock will I receive in the distribution?

 

You will receive one share of Mallinckrodt Inc. common stock for every [            ] ordinary shares of Parent held as of the close of business on the record date. Based on approximately [            ]  million Parent ordinary shares outstanding as of [                    ], 2019, a total of approximately [            ] million shares of Mallinckrodt Inc. common stock will be distributed. For additional information on the distribution, see "The Separation."

Will Mallinckrodt Inc. issue fractional shares of common stock in the distribution?

 

No. We will not issue fractional shares in the distribution. Fractional shares that Parent shareholders would otherwise have been entitled to receive will be aggregated and sold in the public market by the distribution agent. The aggregate net cash proceeds of these sales will be distributed ratably to those shareholders who would otherwise have been entitled to receive fractional shares.

2


What are the conditions to the distribution?

 

The distribution is subject to the following conditions, among others:

 

the receipt of an opinion of tax counsel, in form and substance acceptable to Parent in its sole and absolute discretion, regarding the qualification of the distribution, together with certain related transactions, as a "reorganization" within the meaning of Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the "Code");

 

the receipt of one or more opinions from Duff & Phelps, LLC at the time or times requested by the board of directors of Parent with respect to the solvency of Parent before the distribution and each of Parent and Mallinckrodt Inc. after the distribution, which opinions shall be in form and substance acceptable to Parent in its sole and absolute discretion and which opinions shall not have been withdrawn or rescinded;

 

the debt financing contemplated to be obtained in connection with the separation, as described in the section entitled "Description of Material Indebtedness", having been obtained;

 

Parent and/or its subsidiaries shall have received the cash proceeds from Mallinckrodt Inc. and/or its subsidiaries described in the section entitled "Our Relationship with Parent Following the Distribution—Separation and Distribution Agreement" and Parent shall be satisfied in its sole and absolute discretion that, as of the effective time of the distribution, it shall have no further liability under any of the Mallinckrodt Inc. financing arrangements described in the section entitled "Description of Material Indebtedness";

 

no order, injunction or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the separation or any of the related transactions shall be pending, threatened, issued or in effect;

 

the approval for listing on the NYSE of shares of our common stock to be delivered in the distribution shall have been obtained;

 

the U.S. Securities and Exchange Commission (the "SEC") shall have declared effective the registration statement of which this information statement forms a part, with no order suspending the effectiveness of the registration statement in effect and no proceedings for such purposes pending before or threatened by the SEC;

 

this information statement shall have been made available to the holders of Parent ordinary shares as of the close of business on the record date for the distribution; and

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no other event or development shall exist or have occurred that, in the judgment of Parent's board of directors, in its sole and absolute discretion, makes it inadvisable to effect the separation, the distribution and other related transactions.

 

We cannot assure you that any or all of these conditions will be met. For a complete discussion of all of the conditions to the distribution, see "The Separation—Conditions to the Distribution."

What is the expected date of completion of the separation?

 

The completion and timing of the separation is dependent upon the satisfaction of a number of conditions. We expect shares of our common stock to be distributed after the close of trading on [                    ], 2019 to the holders of record of ordinary shares of Parent at the close of business on the record date; however, no assurance can be provided as to the timing of the separation or that all conditions to the separation will be met.

Can Parent decide to cancel the distribution even if all of the conditions have been met?

 

Yes. The distribution is subject to the satisfaction or waiver of certain conditions. See "The Separation—Conditions to the Distribution." Until the distribution has occurred, Parent has the right to terminate the distribution, even if all of the conditions are satisfied, if at any time the board of directors of Parent determines that the distribution is not in the best interests of Parent and its shareholders or that market conditions or other circumstances are such that it is not advisable at that time to separate the Mallinckrodt Inc. Business from the remainder of Parent.

What if I want to sell my Parent ordinary shares or my shares of Mallinckrodt Inc. common stock?

 

You should consult with your financial and tax advisors.

If you decide to sell any ordinary shares of Parent before the distribution date, you should make sure your broker, bank or other nominee understands whether you want to sell your ordinary shares of Parent with or without your entitlement to shares of Mallinckrodt Inc. common stock pursuant to the distribution.

What is "regular-way" and "ex-distribution" trading?

 

Beginning on or shortly before the record date and continuing up to and through the distribution date, it is expected that there will be two markets in ordinary shares of Parent: a "regular-way" market and an "ex-distribution" market. Ordinary shares of Parent that trade in the "regular-way" market will trade with an entitlement to receive shares of Mallinckrodt Inc. common stock to be distributed pursuant to the distribution. Shares that trade in the "ex-distribution" market will trade without an entitlement to receive shares of Mallinckrodt Inc. common stock to be distributed pursuant to the distribution. Parent cannot predict the trading prices of its ordinary shares before, on or after the distribution date.

4


Where will I be able to trade shares of Mallinckrodt Inc. common stock?

 

We intend to apply for authorization to list shares of our common stock on the NYSE under the symbol "MNK." We anticipate that trading in shares of our common stock will begin on a "when-issued" basis on or shortly before the record date and will continue up to and through the distribution date and that "regular-way" trading in shares of our common stock will begin on the first trading day following the completion of the separation and distribution. If trading begins on a "when-issued" basis, you may purchase or sell shares of our common stock up to and through the distribution date, but your transaction will not settle until after the distribution date. We cannot predict the trading prices of shares of our common stock before, on or after the distribution date.

What will happen to the listing of Parent's ordinary shares?

 

Ordinary shares of Parent will continue to trade on the NYSE after the distribution but will be traded under the new ticker symbol "SRTX" rather than the existing "MNK" ticker symbol (which will be adopted as the ticker symbol for shares of common stock of Mallinckrodt Inc. in connection with the separation). The change in Parent's ticker symbol is expected to occur at the same time as or prior to the distribution.

Will the number of ordinary shares of Parent that I own change as a result of the distribution?

 

No. The number of ordinary shares of Parent that you own will not change as a result of the distribution.

Will the distribution affect the market price of my Parent ordinary shares?

 

Yes. As a result of the distribution, Parent expects the trading price of Parent ordinary shares immediately following the distribution to be lower than the "regular-way" trading price of such shares immediately prior to the distribution because the trading price will no longer reflect the value of the Mallinckrodt Inc. Business held by Mallinckrodt Inc. There can be no assurance that the aggregate market value of Parent ordinary shares and shares of Mallinckrodt Inc. common stock will be equal to or higher than what the market value of Parent ordinary shares would be if the separation did not occur. This means, for example, that the combined trading prices of one Parent ordinary share and [            ] shares of Mallinckrodt Inc. common stock after the distribution may be equal to, greater than or less than the trading price of [            ] Parent ordinary shares before the distribution.

What are the material U.S. federal income tax consequences of the separation?

 

Parent expects to receive an opinion (the "tax opinion") from Wachtell, Lipton, Rosen & Katz to the effect that the distribution, together with certain related transactions, should qualify as a "reorganization" within the meaning of Sections 355 and 368(a)(1)(D) of the Code. See "The Separation—Conditions to the Distribution."

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If the distribution, together with certain related transactions, so qualifies, generally no gain or loss will be recognized by you, and no amount will be included in your income, for U.S. federal income tax purposes upon the receipt of shares of Mallinckrodt Inc. common stock in the distribution. You will, however, recognize gain or loss for U.S. federal income tax purposes with respect to any cash received in lieu of a fractional share of Mallinckrodt Inc. common stock.

 

You should consult your own tax advisor as to the particular tax consequences of the distribution to you, including the applicability and effect of any U.S. federal, state and local tax laws, as well as any non-U.S. tax laws. For more information regarding the material U.S. federal income tax consequences of the distribution, see the section entitled "Material U.S. Federal Income Tax Consequences."

What will Mallinckrodt Inc.'s relationship be with Parent following the separation?

 

In connection with the separation, we and Parent will enter into a separation and distribution agreement and various other agreements, including a transition services agreement, a tax matters agreement and an employee matters agreement. These agreements will provide a framework for our relationship with Parent after the separation and provide for the allocation between us and Parent of Parent's assets, employees, liabilities and obligations (including its property, employee benefits, environmental liabilities and tax liabilities) attributable to periods prior to, at and after our separation from Parent. For additional information regarding the separation and distribution agreement and other transaction agreements, see "Risk Factors—Risks Related to the Separation" and "Our Relationship with Parent Following the Distribution."

Who will manage Mallinckrodt Inc. after the separation?

 

Led by Matthew Harbaugh, who will be our President and Chief Executive Officer after the separation, our executive management team possesses deep knowledge of, and extensive experience in, our industry. Our executive management team has been involved in strategic decisions with respect to the Mallinckrodt Inc. Business and in establishing a vision for the future of Mallinckrodt Inc. For more information regarding our management, see "Management."

Are there risks associated with owning Mallinckrodt Inc. common stock?

 

Yes. Our business is subject to both general and specific risks relating to our business, the industry in which we operate, our ongoing contractual relationships with Parent and our status as a separate, publicly traded company. There also are risks relating to the separation, certain tax matters and ownership of shares of our common stock. These risks are described in the "Risk Factors" section of this information statement beginning on page 21. You are encouraged to read that section carefully.

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Does Mallinckrodt Inc. plan to pay dividends?

 

We currently intend to retain any earnings to finance research and development, acquisitions and the operation and expansion of our business, and do not anticipate paying any cash dividends for the foreseeable future. As a result, the return on your investment in our common stock will be determined by increases and decreases in the market price of our common stock. See "Dividend Policy."

Will Mallinckrodt Inc. incur any debt prior to or at the time of the distribution?

 

Yes. We anticipate entering into a [            ]-year asset-backed revolving credit facility allowing borrowings of up to $[            ] million in the aggregate. Our debt balance at the time of the separation will be determined based on internal capital planning and consideration of the following factors and assumptions: anticipated business plan, operating activities, general economic contingencies, optimal debt levels and desired financing capacity. See "Description of Material Indebtedness," "Risk Factors—Risks Related to Our Business and Our Industry" and "Risk Factors—Risks Related to the Separation."

Who will be the distribution agent, transfer agent, and registrar for the shares of Mallinckrodt Inc. common stock?

 

Computershare will be the distribution agent, transfer agent, and registrar for our common stock. For questions relating to the transfer or mechanics of the distribution, you should contact:

Computershare
250 Royall Street
Canton, MA 02021
(877) 487-1633

Where can I find more information about Parent and Mallinckrodt Inc.?

 

Before the distribution, if you have any questions relating to Parent's business performance, you should contact:

Mallinckrodt plc (to be renamed Sonorant Therapeutics plc)
Investor Relations
[            ]

After the distribution, our shareholders who have any questions relating to our business performance should contact us at:

Mallinckrodt Inc.
Investor Relations
[            ]

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INFORMATION STATEMENT SUMMARY

        The following is a summary of material information discussed in this information statement. This summary may not contain all of the details concerning the separation or other information that may be important to you. To better understand the separation and our business and financial position, you should carefully review this entire information statement. Except as otherwise indicated or unless the context otherwise requires: the information included in this information statement about Mallinckrodt Inc. assumes the completion of all of the transactions referred to in this information statement in connection with the separation; references to "Mallinckrodt Inc.," "we," "us," "our," "our company" and "the company" refer to Mallinckrodt Inc., a Delaware corporation, and its combined subsidiaries; references to "Parent" refer to Mallinckrodt plc, a public limited company incorporated in Ireland (which it is currently intended will be renamed Sonorant Therapeutics plc), and its multiple wholly owned subsidiaries, including Mallinckrodt Inc. and its combined subsidiaries prior to completion of the distribution; references to the "Mallinckrodt Inc. Business" refer to Parent's Specialty Generics/Active Pharmaceutical Ingredients business and certain other assets and liabilities of Parent, in each case as further described herein; references to the "separation" refer to the separation of the Mallinckrodt Inc. Business from Parent's other businesses and the creation, as a result of the distribution, of an independent, publicly traded company, Mallinckrodt Inc., to hold the assets and liabilities associated with the Mallinckrodt Inc. Business after the distribution; references to the "distribution" refer to the dividend on Parent ordinary shares outstanding as of the close of business on the record date that will be satisfied by Mallinckrodt Inc.'s issuance of shares of our common stock to the persons entitled to receive the dividend; references to Mallinckrodt Inc.'s historical business and operations refer to the business and operations of the Mallinckrodt Inc. Business as it was historically managed as part of Parent prior to completion of the separation; and references to "dollars" or "$" refer to U.S. dollars.

        Except as otherwise indicated, references in this information statement to fiscal 2019, fiscal 2018, fiscal 2017 and fiscal 2016 are to Mallinckrodt Inc.'s fiscal years ending or ended December 27, 2019, December 28, 2018, December 29, 2017 and September 30, 2016. We historically reported our results based on a "52-53 week" year ending on the last Friday of September. During fiscal 2016, we changed our fiscal year-end to the last Friday in December from the last Friday in September. The change in fiscal year became effective for our 2017 fiscal year, which began on December 31, 2016 and ended on December 29, 2017. As a result of the change in fiscal year-end, the period from October 1, 2016 through December 30, 2016 is referred to herein as "the three months ended December 30, 2016" with the comparable period from September 26, 2015 through December 25, 2015 referred to as "the three months ended December 25, 2015."

Our Company

        We are a company focused on providing our customers high-quality complex generic pharmaceutical products and active pharmaceutical ingredients ("API(s)"). We use our specialized characterization, development, formulation, and synthetic and analytical chemistry expertise to develop and manufacture a range of complex generic pharmaceutical products and APIs. Our products include: immediate- and extended-release tablets and capsules; oral solutions; immediate- and extended-release oral suspensions; dispersible tablets; orally disintegrating tablets; transdermal patches; and intramuscular, subcutaneous and intravenous injectable products.

        Our key products include:

    Hydrocodone API and hydrocodone-containing tablets in a variety of strengths;

    Oxycodone API and oxycodone-containing tablets in a variety of strengths;

    Acetaminophen API in bulk powder and directly compressible forms;

    Other controlled substances (including API and generic products); and

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    Other products (including contract manufacturing).

        We sell our complex generic pharmaceutical products primarily to distributors who subsequently sell our products to retail pharmacy chains, independent pharmacies, government entities, hospitals, hospice providers, and long-term care providers. Those entities then dispense our complex generic products to patients. We sell and distribute API products to our customer base, which includes pharmaceutical companies, contract manufacturers and other associated industrial customers. We also utilize our APIs for internal drug product development. In some regions of the world, especially in Asia, we use authorized distributors to sell our API products. We also manufacture products for third parties under contract.

        We produce a broad offering of over 20 generic product families, most of which are U.S. Drug Enforcement Administration ("DEA") controlled substances, across three manufacturing facilities in the U.S. and our contract manufacturing network. Our facilities are highly regulated by the U.S. Food and Drug Administration ("FDA"), DEA and other agencies. We are one of the largest generic controlled substance pharmaceutical businesses in the U.S. Our key products include hydrocodone-containing tablets, oxycodone-containing tablets and other controlled substances, all of which are significant products for the treatment of pain. Our other controlled substance products include products for the treatment of attention deficit hyperactivity disorder ("ADHD") and addiction disorders. Historically, our primary competition has been other U.S.-based participants, due to importation restrictions on controlled substance API and drug products. In recent years, our competitors have increasingly become companies based outside the U.S. that have acquired or built facilities in the U.S. in order to compete in the U.S. market.

        We produce over 40 API products across three manufacturing sites for use in our own complex generic pharmaceutical products and for sale to third parties—many of whom are competitors with our complex generic pharmaceuticals business—for use in branded and generic products in a variety of therapeutic areas. Our API business manufactures high-quality products that meet our customers' unique specifications and provides comprehensive technical services to our customers. We are among the world's largest manufacturers of acetaminophen and are the only producer in the North American and European regions. We also manufacture controlled substance APIs and are one of the leading U.S. producers of opioid and stimulant molecules for use in pharmaceuticals which treat pain and ADHD.

Our Competitive Strengths

        We believe we have the following strengths:

    Distinct vertically integrated manufacturing and distribution skills with a reputation for quality.  Our manufacturing and supply chain capabilities enable highly efficient controlled substance tableting, packaging and distribution. We have one of the world's largest DEA Schedule II vaults for the storage of raw materials, intermediates and finished goods. Whenever possible, we leverage our vertically integrated assets and capabilities to reduce costs and deliver high-quality products and services. We have received numerous awards from our customers for our reliability of supply and product quality.

    Increasingly diverse pipeline of complex generic product candidates that leverage our specialized characterization, deformulation and formulation development capabilities.  We have technical capabilities that support the advancement of our complex generics pipeline. These capabilities enable us to develop technically challenging products in a broad range of dosage forms, including tablets, capsules, oral liquids, solutions and complex injectables. Our advanced characterization capability enables us to utilize characterization in lieu of clinical trials for bioequivalence for a select number of products.

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    Industry-leading controlled substance portfolio of complex generic pharmaceutical products and APIs for pain management.  We have a strong position in the controlled substance generics market. Our industry-leading controlled substance portfolio allows us to serve the most complex needs of our customers. We believe we offer the broadest product line of opioid and other controlled substances (primarily DEA Schedule II and III), giving us a leading position in the controlled substance generics market. In an industry characterized by strict regulatory and technical demands, we believe our comprehensive portfolio allows us to efficiently tailor our offerings to meet the needs of customer, legal and regulatory stakeholders.

    Track record of expertise in the acquisition, importation and handling of government-regulated raw materials.  We have a proven track record of expertise in the acquisition, importation and handling of highly regulated narcotic raw materials. We operate our business under rigorous quality standards and emphasize delivering quality with efficiency across our manufacturing operations. The acquisition of certain raw materials and the processing of those materials into finished products require a close collaboration with a wide variety of state and federal regulatory authorities, including the FDA and DEA. We have a long history of dealing with these regulatory agencies, including addressing concerns and issues raised by authorities in connection with our operations, and managing the related complexity to provide ongoing, reliable access to these highly controlled products. In July 2017, we entered into a final settlement with the DEA and certain other governmental authorities to settle investigations relating to our suspicious order monitoring program for controlled substances and our record-keeping and security practices at our Hobart facility, as discussed in more detail under "Business—Legal Proceedings." We have a unique combination of physical assets, long-term contractual agreements with suppliers, relationships with regulatory agencies and longevity in the market, which we believe delivers value to our customers and shareholders which our competitors find difficult to match.

    Diversified revenue and product profile with demonstrated operational excellence.  We have a diversified revenue base across APIs, contract manufacturing and finished dosage form generics with solid cash flows and a long-standing leadership position in controlled substances. In 2018, our diverse portfolio of products generated $718.9 million of total revenue.

    Experienced management team with dedicated employees.  Our executive management team is a diverse set of industry veterans, with more than 100 years of experience with our company, and more than 160 years in the life sciences industry. We benefit from having a management team with extensive experience in small, medium and large life sciences firms. Matthew Harbaugh, who will serve as our President and Chief Executive Officer, has more than 20 years of experience in life sciences and has been in senior management with Parent for over 10 years. We are proud of our dedicated work force with an average employee tenure of 12 years. We embrace a culture of quality, integrity and service and seek to create an environment where our employees are empowered to drive outcomes.

Our Strategy

        Our strategy is to enhance growth by expanding into new markets, developing and launching complex generic pharmaceuticals and APIs, and through our continuous improvement mindset, optimizing the efficiency and quality of our manufacturing processes for all products, and acquiring products and businesses that leverage our core operational and commercial capabilities.

        We are committed to the following goals:

    Investing in innovative growth opportunities.  We intend to pursue growth opportunities in both existing and adjacent new markets, which we believe will complement our core competencies and accelerate our organic growth. We provide pharmaceutical products and services to either our

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      customer base of third parties (contract customers) or to distributors of pharmaceuticals. We plan on growing our business through innovative new product offerings and strategically managing our business portfolio by acquiring new products or businesses that meet the needs of our customers. In addition, we will drive growth through the acquisition of products and businesses in markets that are adjacent to ones we currently serve to leverage our current capabilities and industry knowledge in new markets.

    Expanding and diversifying key products to meet increasingly complex demands for our customers.  We are investing in our pipeline to fuel our future growth. Historically, our complex generic pharmaceutical products were concentrated in the controlled substance oral solid dosage form space, which we intend to continue to expand. However, in recent years, we have expanded our technical capabilities beyond oral solids and diversified our pipeline beyond controlled substances. We believe these pipeline products, assuming we will obtain regulatory approvals, will enable us to expand and diversify our commercial product portfolio beyond controlled substance oral dosage form.

    Driving operational excellence through a continuous improvement mindset to optimize efficiency and quality of manufacturing while leveraging our U.S. facilities for contract manufacturing.  We intend to continue to leverage vertical integration and optimize our manufacturing capabilities and processes to continue delivering our products in a cost-efficient, reliable and high-quality manner, with a goal of being recognized as an industry-leading supplier as we are today. We also plan to continue to leverage our available pharmaceutical and API capacity to manufacture products under long-term supply and license agreements with third parties.

Risks Associated with Mallinckrodt Inc.'s Business and the Separation

        An investment in our common stock is subject to a number of risks, including risks relating to the separation. The following list of risk factors is not exhaustive. Please read the information in the section entitled "Risk Factors" for a more thorough description of these and other risks.

Risks Related to Our Business and Our Industry

    Governmental investigations, inquiries, and regulatory actions and lawsuits brought against us by government agencies and private parties with respect to our historical commercialization of opioids could adversely affect our business, financial condition, results of operations and cash flows.

    The DEA regulates the availability of controlled substances, including APIs, drug products under development and marketed drug products. At times, the procurement and manufacturing quotas granted by the DEA may be insufficient to meet our needs.

    After the separation, we expect to have substantial indebtedness.

    Our ability to generate sufficient cash to service all of our indebtedness depends on various factors, including our financial condition and operating performance, and is not assured.

    The terms of the agreements that will govern our indebtedness are expected to restrict our current and future operations.

    Our expected variable-rate indebtedness exposes us to interest rate risk, which could cause our debt service obligations to increase significantly.

    Our debt levels following the separation and challenges in the commercial and credit environment may materially adversely affect our ability to issue debt on acceptable terms and/or our future access to capital.

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    We may need additional financing in the future to meet our capital needs or to make acquisitions, and such financing may not be available on favorable or acceptable terms, and may be dilutive to existing shareholders.

    The manufacture of our products is highly exacting and complex, and our business could suffer if we, or our suppliers, encounter manufacturing or supply problems.

    We may be unable to protect our intellectual property rights, intellectual property rights may be limited or we may be subject to claims that we infringe on the intellectual property rights of others.

    Extensive laws and regulations govern the industry in which we operate and any failure to comply with such laws and regulations, including any changes to those laws and regulations, may materially adversely affect us.

    Consolidation of our customer base and commercial alliances among our customers may materially adversely affect us.

    If our business development activities are unsuccessful, it may adversely affect us.

    If we fail to successfully identify, develop and secure regulatory approval for additional generic pharmaceutical products or fail to introduce these generic products on a timely basis, our business, financial condition, results of operations and cash flows may decline.

    If we encounter negative developments with respect to our existing products, or are unable to successfully introduce new products, it may materially adversely affect our business.

    Sales of our products are affected by, and we may be negatively impacted by any changes to, the reimbursement practices of governmental health administration authorities, private health coverage insurers and other third-party payers.

    Our reporting and payment obligations under the Medicare and Medicaid rebate programs, and other governmental purchasing and rebate programs, are complex. Any determination of failure to comply with these obligations or those relating to healthcare fraud and abuse laws could have a material adverse effect on our business.

    We may not achieve the anticipated benefits of price increases enacted on our pharmaceutical products, which may adversely affect our business.

    We may not achieve some or all of the expected benefits of any restructuring activities we may undertake and such restructuring activities may adversely affect our business.

    We face significant competition and may not be able to compete effectively.

    We may incur product liability losses and other litigation liability.

    The healthcare industry has been under increasing scrutiny from governments, legislative bodies and enforcement agencies related to its sales, marketing and pricing practices, and changes to, or non-compliance with, relevant policies, laws, regulations or government guidance may result in actions that could adversely affect our business.

    Our operations expose us to the risk of violations of applicable health, safety and environmental laws and regulations, and related (and potentially material) liabilities and litigation.

    If we are unable to recruit or retain key personnel, we may be unable to maintain or expand our business.

    Our global operations expose us to risks and challenges associated with conducting business internationally.

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    Our business depends on the continued effectiveness and availability of our information technology infrastructure, and failures of this infrastructure could harm our operations.

    We are increasingly dependent on information technology and our systems and infrastructure face certain risks, including cybersecurity and data leakage risks.

    We are subject to labor and employment laws and regulations, which could increase our costs and restrict our operations in the future.

    Our operations may be interrupted by the occurrence of a natural disaster or other catastrophic event at our facilities.

Risks Related to the Separation

    We have no recent history operating as an independent company, and our historical and pro forma financial information is not necessarily representative of the results that we would have achieved as a separate, publicly traded company and may not be an accurate indicator of our future results of operations.

    Parent's plan to separate the Mallinckrodt Inc. Business from the remainder of its business is subject to various risks and uncertainties and may not be completed in accordance with the expected plans or anticipated timeline, or at all, and will involve significant time and expense, which could disrupt or adversely affect our business.

    As we build our information technology infrastructure and transition our data to our own systems, we could incur substantial additional costs and experience temporary business interruptions.

    Our accounting and other management systems and resources may not be adequately prepared to meet the financial reporting and other requirements to which we will be subject following the separation.

    We may have received more favorable terms from unaffiliated third parties than the terms we will receive in our agreements with Parent.

    Parent may fail to perform under various transaction agreements that will be executed as part of the separation or we may fail to have necessary systems and services in place when certain of the transaction agreements expire.

    Potential indemnification liabilities to Parent pursuant to the separation and distribution agreement could materially adversely affect us.

    After the separation, certain of our executive officers and other key employees may have actual or potential conflicts of interest because of their current or previous positions at Parent.

    We may not achieve some or all of the expected benefits of the separation, and the separation may materially adversely affect our business.

    No vote of Parent's shareholders is required to complete the separation and the distribution. As a result, if you do not want to receive shares of our common stock in the distribution upon its completion, your sole recourse will be to divest yourself of your Parent ordinary shares prior to the record date.

    If the distribution, together with certain related transactions, fails to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, Mallinckrodt Inc., Parent and Parent's shareholders could be subject to significant tax liability or tax indemnity obligations.

    We may not be able to engage in desirable transactions following the distribution.

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Risks Related to Our Common Stock

    We cannot be certain that an active trading market for shares of our common stock will develop or be sustained after the distribution, and, following the distribution, our stock price may fluctuate significantly.

    A number of shares of our common stock are or will be eligible for future sale, which may cause our stock price to decline.

    If securities or industry analysts do not publish research or publish misleading or unfavorable research about our business, our stock price and trading volume could decline.

    There may be substantial changes in our shareholder base following the distribution.

    We do not expect to pay any cash dividends for the foreseeable future.

    Your percentage of ownership in Mallinckrodt Inc. may be diluted in the future.

    Provisions in our amended and restated certificate of incorporation and bylaws and of applicable law may prevent or delay a potential acquisition of Mallinckrodt Inc., which could decrease the trading price of our common stock.

    Our amended and restated certificate of incorporation will designate the state courts of the State of Delaware, or, if no state court located in the State of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders, which could discourage lawsuits against us and our directors and officers.

    We are an "emerging growth company" and, as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, our common stock may be less attractive to investors for so long as we remain an emerging growth company.

The Separation

        On December 6, 2018, our Parent announced that it intended to separate the Mallinckrodt Inc. Business from the remainder of its business, as further described under "The Separation" included elsewhere in this information statement. On [                  ], 2019, the Parent's board of directors approved the transfer of the Mallinckrodt Inc. Business to Mallinckrodt Inc. and a pro rata distribution of Mallinckrodt Inc. common stock to Parent's shareholders on the basis of one share of Mallinckrodt Inc. common stock for every [                  ] Parent ordinary shares held as of the close of business on the record date.

        Mallinckrodt Inc. was incorporated as a Delaware corporation on January 18, 2019 for the purpose of holding the Mallinckrodt Inc. Business following the separation. On or prior to the distribution date, Parent will transfer the Mallinckrodt Inc. Business to us, in return for which, among other things, we will issue shares of our common stock to Parent ordinary shareholders, pro rata to their respective holdings, on the distribution date. Prior to the transfer by Parent to Mallinckrodt Inc. of our business, we will have no operations other than those incidental to our formation and in preparation for the separation. Immediately following the distribution, the persons entitled to receive shares of Mallinckrodt Inc. common stock in the distribution will own all of the outstanding shares of our common stock.

Our Post-Separation Relationship with Parent

        In connection with the separation, we and Parent will enter into a separation and distribution agreement (the "separation and distribution agreement") and various other agreements, including a transition services agreement, a tax matters agreement and an employee matters agreement (the

14


"separation-related agreements"). These agreements will provide a framework for our relationship with Parent after the separation and provide for the allocation between us and Parent of Parent's assets, employees, liabilities and obligations (including its property, employee benefits, environmental liabilities and tax liabilities) attributable to periods prior to, at and after our separation from Parent. For additional information regarding the separation and distribution agreement and other transaction agreements, see "Risk Factors—Risks Related to the Separation" and "Our Relationship with Parent Following the Distribution."

Reasons for the Separation

        The Parent's board of directors believes that separating the Mallinckrodt Inc. Business from the remainder of Parent is in the best interests of Parent and its shareholders for a number of reasons, including that:

    The separation will allow each of the Mallinckrodt Inc. Business and Parent's other businesses to focus on its own strategic and operational plans and capital structure without diverting human and financial resources to the other business or being constrained by a board and management that are also responsible for overseeing and furthering the objectives of the other business. The separation will also enhance the success of each business by reducing internal complexity and enabling each company to avoid management, systemic and other problems that arise by operating different businesses within the same corporate structure.

    The separation will enable each company to pursue its distinct business strategy, including setting an optimal level of investment in research and development projects and in the operation and expansion of its businesses.

    The separation will enable each company to pursue the capital structure that is most appropriate for its business and business strategy. Each business has different capital requirements that cannot be optimally addressed with a single capital structure. The separation will permit each company to pursue a different capital structure that is tailored to the needs of its business, and that results in a more efficient pricing of its equity in the financial markets.

    The separation will create an independent equity structure that will provide Mallinckrodt Inc. with direct access to the capital markets, and facilitate each company's ability to capitalize on its unique growth opportunities and effect future acquisitions using equity as currency.

    The separation will increase the effectiveness of the equity-based compensation programs of each company by tying the value of the equity compensation awarded to employees, officers or directors more directly to the performance of the business for which these individuals provide services.

    The separation will allow each company to set new investor expectations for their respective businesses and separate financial prospects based on their unique investment identities, including the merits, performance and future prospects of their respective businesses. The separation will also provide investors with two distinct and targeted investment opportunities, facilitating each company's access to the capital markets.

        The Parent's board of directors considered a number of potentially negative factors in evaluating the separation, including risks relating to the creation of a new public company, possible increased costs resulting from the existence of two separate companies and one-time separation costs, but concluded that the potential benefits of the separation outweighed these factors. The Parent's board of directors also considered the allocation of liabilities (including certain contingent and disputed liabilities relating to opioid litigation) between Parent and Mallinckrodt Inc. in the separation, as well as related indemnification rights, in determining the terms and conditions of, as well as whether to approve, the

15


separation. For more information, see "The Separation—Reasons for the Separation" and "Risk Factors."

Emerging Growth Company Status

        We are an "emerging growth company," as defined in the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that apply to other public companies that are not emerging growth companies, including, but not limited to, more limited disclosure requirements with respect to financial information and executive compensation, compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and the requirements to hold a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved. We may take advantage of these exemptions until we no longer qualify as an emerging growth company. We cannot predict if investors will find our common stock less attractive because we intend to rely on some or all of these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be lower or more volatile as a result.

        In addition, Section 107 of the JOBS Act provides that an emerging growth company may take advantage of the extended transition period provided in Section 13(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected not to take advantage of the benefits of this extended transition period and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. This election is irrevocable.

        We could remain an emerging growth company until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues, as defined by the Exchange Act, exceed $1.07 billion, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement under the Securities Act of 1933, as amended (the "Securities Act"), (iii) the date that we become a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iv) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period.

Corporate Information

        Our principal executive offices are located in the Saint Louis area at 385 Marshall Avenue, Webster Groves, Missouri 63119. Our telephone number at this location is 314-654-2000. Our website is [                  ].

Reason for Furnishing this Information Statement

        This information statement is being furnished solely to provide information to the shareholders of Parent who will receive shares of Mallinckrodt Inc. common stock in the distribution. It is not, and is not to be construed as, an inducement or encouragement to buy or sell any of Parent's or Mallinckrodt Inc.'s securities. The information contained in this information statement is believed by Mallinckrodt Inc. to be accurate as of the date set forth on its cover. Changes may occur after that date and neither Parent nor Mallinckrodt Inc. will update this information, except in the normal course of their respective disclosure obligations and practices.

        Shareholders of Parent as of the close of business on the record date will not be required to take any action to receive shares of Mallinckrodt Inc. common stock in the distribution, but you are urged

16


to read this entire information statement carefully. No shareholder approval of the distribution is required. You are not being asked for a proxy. You do not need to pay any consideration, exchange or surrender your existing ordinary shares of Parent or take any other action to receive your shares of Mallinckrodt Inc. common stock. The distribution will not affect the number of outstanding ordinary shares of Parent, although by virtue of the separation it is expected to affect the market value of the outstanding ordinary shares of Parent.

        This document is not a prospectus within the meaning of the Prospectus Directive (2003/71/EC) (as amended) and the Prospectus Regulation 2017/1129. No offer of securities to the public is made, or will be made, that requires the publication of a prospectus pursuant to the above directive or any transposing instrument thereof. This document has not been approved or reviewed by or registered with any competent authority or regulatory authority in the European Economic Area. This document does not constitute investment advice or the provision of investment services within the meaning of the Markets in Financial Instruments Directive (2014/65/EU). Neither Parent nor Mallinckrodt Inc. is an authorized investment firm within the meaning of the Markets in Financial Instruments Directive (2014/65/EU) or any transposing instrument thereof and the recipients of this document should seek independent legal and financial advice in determining their actions in respect of or pursuant to this document.

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SUMMARY HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA

        The following table sets forth summary historical financial data for the periods indicated below. The summary statement of income data for the three months ended March 29, 2019 and March 30, 2018 and the summary balance sheet data as of March 29, 2019 have been derived from our unaudited condensed combined financial statements included elsewhere in this information statement. The summary statement of income data for each of fiscal 2018, fiscal 2017, fiscal 2016 and the three months ended December 30, 2016 and the summary balance sheet data as of December 28, 2018 and December 29, 2017 are derived from our audited combined financial statements and accompanying notes included elsewhere in this information statement. The summary balance sheet data as of December 30, 2016 is derived from our audited combined financial statements that are not included in this information statement. The summary balance sheet data as of March 30, 2018 and September 30, 2016 is derived from our unaudited combined financial statements that are not included in this information statement. The summary financial data should be read in conjunction with our combined financial statements and accompanying notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this information statement.

        Our audited combined financial statements and our unaudited condensed combined financial statements (which are sometimes referred to in this information statement collectively as the "combined financial statements") have been prepared by Parent to present the historical operating assets, liabilities and related results of operations of the Mallinckrodt Inc. Business. The combined financial statements include all assets and liabilities related to the operation of the business and which were subject to oversight and review by management of the Mallinckrodt Inc. Business. The combined financial statements do not include certain corporate non-operating assets and liabilities, principally related to changes in the internal capital structure resulting from the internal reorganization of our legal entities to facilitate the separation. These non-operating assets and liabilities do not represent standalone businesses and primarily relate to intercompany transactions.

        The following table also presents summary unaudited pro forma data. The pro forma data for the periods ended March 29, 2019 and December 28, 2018 assumes that the separation occurred on December 30, 2017, the first day of fiscal 2018. The pro forma balance sheet assumes that the separation occurred on March 29, 2019. The pro forma adjustments are based upon available information and assumptions that management believes are reasonable. Refer to the notes to the unaudited pro forma condensed combined financial statements and accompanying notes included elsewhere in this information statement for a discussion of adjustments reflected in the pro forma data.

        The summary historical and unaudited pro forma data does not necessarily reflect what our results of operations and financial condition would have been had we operated as a separate, publicly traded company during the periods presented. In addition, they are not necessarily indicative of our future results of operations or financial condition.

Non-GAAP Financial Measures

        Adjusted EBITDA represents earnings from net income/loss before interest, income taxes, depreciation and amortization, adjusted to exclude certain items. These items include impairment charges; pension settlement charges, net; restructuring and related charges, net; transaction costs; significant legal and environmental charges; and separation costs. We have provided this non-GAAP financial measure because it is used by management, along with financial measures in accordance with accounting principles generally accepted in the U.S. ("GAAP"), to evaluate our operating performance. In addition, we believe it will be used by certain investors to measure our operating results. Management believes that presenting Adjusted EBITDA to investors provides useful information about our performance across reporting periods on a consistent basis by adjusting for certain items that we

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believe are not reflective of the operational performance of the business. Adjusted EBITDA has the following limitations:

    it does not reflect our cash expenditures, future requirements, for capital expenditures or contractual commitments;

    it does not reflect changes in, or cash requirements for, our working capital needs;

    it does not reflect interest expense or the cash requirements necessary to service interest or principal payments;

    it is not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows; and

    other companies in our industry may calculate this measure differently than we do, limiting its usefulness as a comparative measure.

        Because of these limitations, Adjusted EBITDA should be considered supplemental to and not a substitute for net income or any other performance measures derived in accordance with GAAP. See our combined financial statements included elsewhere in this information statement for our GAAP results.

 
  Three Months Ended   Fiscal Year Ended    
 
 
  Pro forma
for the
Separation
   
   
  Pro forma
for the
Separation
   
   
   
  Three
Months
Ended
 
(dollars in millions)
  March 29,
2019
  March 29,
2019
  March 30,
2018
  December 28,
2018
  December 28,
2018
  December 29,
2017
  September 30,
2016
  December 30,
2016
 

Combined Statement of Income Data:

                                                 

Data:

   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Net sales

  $                $ 186.4   $ 182.7   $                $ 718.9   $ 869.6   $ 1,092.0   $ 229.8  

Gross profit

          68.8     68.7           242.3     366.2     611.3     112.2  

Operating (loss) income

          (1.3 )   16.2           16.9     174.1     334.8     (166.3 )

Income (loss) before income taxes

          6.0     19.5           52.0     99.1     323.7     (212.4 )

Net income (loss)

          2.7     13.2           42.4     82.5     218.2     (209.3 )

Combined Balance Sheet Data

   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

(End of Period):

                                                 

Total assets

  $                $ 1,387.2   $ 1,333.3   $     $ 1,398.5   $ 1,333.9   $ 1,608.3   $ 1,362.6  

Parent company equity

          962.6     934.5           971.8     915.9     1,102.7     881.8  

Other Financial Data:

   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Adjusted EBITDA(1)

  $                $ 35.0   $ 42.7   $     $ 151.9   $ 269.3   $ 442.0   $ 71.1  

(1)
The following table provides a reconciliation of our net income (loss) to Adjusted EBITDA for the periods presented:

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  Three Months Ended   Fiscal Year Ended    
 
 
  Pro forma
for the
Separation
   
   
  Pro forma
for the
Separation
   
   
   
  Three
Months
Ended
 
(dollars in millions)
  March 29,
2019
  March 29,
2019
  March 30,
2018
  December 28,
2018
  December 28,
2018
  December 29,
2017
  September 30,
2016
  December 30,
2016
 

Net income (loss)

  $                $ 2.7   $ 13.2   $                $ 42.4   $ 82.5   $ 218.2   $ (209.3 )

Interest expense, net

                                     

Provision for (benefit from) income taxes

          3.3     6.3           9.6     16.6     105.5     (3.1 )

Depreciation expense

          15.0     15.3           62.7     61.0     68.3     16.2  

Amortization expense

          2.8     2.8           11.3     17.4     22.5     5.6  

Impairment charges

                        2.0             214.3  

Pension settlement charges, net

                            70.5     7.9     45.0  

Restructuring and related charges, net

          3.5     5.1           6.7     7.7     4.6     1.1  

Transaction costs(1)

                        4.7     13.6         1.3  

Significant legal and environmental charges

                        7.7         15.0      

Separation costs

          7.7               4.8              

Adjusted EBITDA

  $                $ 35.0   $ 42.7   $     $ 151.9   $ 269.3   $ 442.0   $ 71.1  

(1)
Represents incremental costs that resulted directly from, and that were essential to, a sale transaction that was previously contemplated by Parent and therefore would not have been incurred by Mallinckrodt Inc. on a standalone basis.

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RISK FACTORS

        You should carefully consider the following risks and other information in this information statement in evaluating us and our common stock. Our competitive position, business, financial condition, results of operations and cash flows can be impacted by the factors set forth below, any one of which could cause our actual results to vary materially from recent results or from our anticipated future results. The risk factors generally have been separated into four groups: risks related to our business and our industry, risks related to the separation, risks related to tax matters and risks related to our common stock.

Risks Related to Our Business and Our Industry

        We operate in a rapidly changing environment that involves a number of risks, some of which are beyond our control. The following discussion highlights some of these risks and others are discussed elsewhere in this information statement. These and other risks could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

Governmental investigations, inquiries, and regulatory actions and lawsuits brought against us by government agencies and private parties with respect to our historical commercialization of opioids could adversely affect our business, financial condition, results of operations and cash flows.

        As a result of greater public awareness of the public health issue of opioid abuse, there has been increased scrutiny of, and investigation into, the commercial practices of opioid manufacturers by state and federal agencies. We, along with other opioid manufacturers, have been the subject of federal and state government investigations and enforcement actions, focused on the misuse and abuse of opioid medications in the U.S. Similar investigations may be initiated in the future.

        In addition, a significant number of lawsuits have been filed against us, other opioid manufacturers, distributors, and others in the supply chain by cities, counties, state attorneys general and private persons seeking to hold us and others accountable for opioid misuse and abuse. The lawsuits assert a variety of claims, including, but not limited to, public nuisance, negligence, civil conspiracy, fraud, violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO") or similar state laws, violations of state Controlled Substances Act or state False Claims Act, products liability, consumer fraud, unfair or deceptive trade practices, false advertising, insurance fraud, unjust enrichment and other common law and statutory claims arising from defendants' manufacturing, distribution, marketing and promotion of opioids and seek restitution, damages, injunctive and other relief and attorneys' fees and costs. The claims generally are based on alleged misrepresentations and/or omissions in connection with the sale and marketing of prescription opioid medications and/or an alleged failure to take adequate steps to prevent abuse and diversion. Other parties may file similar lawsuits against us in the future.

        As a company that first began processing opioids in the 1890s, we understand the utility of these products and that they are safe and effective when taken as appropriately prescribed. We are deeply committed to diversion control efforts, have sophisticated systems in place to identify suspicious orders, and engage in significant due diligence and ongoing monitoring of customers. While we are vigorously defending ourselves in these matters, the nature and scope of these matters is unique, and current public perceptions of the public health issue of opioid abuse may present challenges to favorable resolution of these claims. Accordingly, it is not feasible to predict the ultimate outcome of these investigations, enforcement actions and lawsuits. The allegations against us may negatively affect our business in various ways, including through harm to our reputation. We will continue to incur significant legal costs in defending these matters and could in the future be required to pay significant amounts as a result of fines, penalties, settlements or judgments, potentially in excess of accruals. We may be unable to obtain or maintain insurance in the future on acceptable terms or with adequate coverage against potential liabilities or other losses. The resolution of, or increase in accruals for, one

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or more of these matters could have a material adverse effect on our business, financial condition, results of operations and cash flows.

        In addition, legislative, regulatory or industry measures to address the misuse of prescription opioid medications may also affect our business in ways that we are not able to predict. For example, the State of New York enacted the Opioid Stewardship Act ("OSA"), which went into effect on July 1, 2018 and established an aggregate $100 million annual assessment on sales of certain opioid medications in New York. The OSA was successfully challenged, and on December 19, 2018, the U.S. District Court for the Southern District of New York ruled that the OSA was unconstitutional and enjoined its enforcement. On January 17, 2019, the State of New York appealed this ruling. In April 2019, the State of New York passed its 2020 budget, which amended the OSA so that it would apply only to the sale and distribution of certain opiates in New York for 2017 and 2018 and, effective July 1, 2019, imposes an excise tax on certain opioids. Furthermore, other states are considering similar legislation that could require entities to pay an assessment or tax on the sale or distribution of opioid medications in those states and may vary in the assessment or tax amounts and the means of calculation from the OSA. If other state or local jurisdictions successfully enact such legislation and we are not able to mitigate the impact on our business through operational changes or commercial arrangements, such legislation in the aggregate may have a material adverse effect on our business, financial condition, results of operations and cash flows. See the risk factor "Extensive laws and regulations govern the industry in which we operate, and any failure to comply with such laws and regulations, including any changes to those laws and regulations may materially adversely affect us" for more information.

        Furthermore, in the current climate, stories regarding prescription drug abuse and the diversion of opioids and other controlled substances are frequently in the media. Unfavorable publicity regarding the use or misuse of opioid drugs, the limitations of abuse-deterrent formulations, the ability of drug abusers to discover previously unknown ways to abuse our products, public inquiries and investigations into prescription drug abuse, litigation, or regulatory activity regarding sales, marketing, distribution or storage of opioids could have a material adverse effect on our reputation and impact the results of litigation.

        Finally, various government entities, including the U.S. Congress, state legislatures or other policy-making bodies have in the past and may in the future hold hearings, conduct investigations and/or issue reports calling attention to the opioid crisis, and may mention or criticize the perceived role of manufacturers, including us, in the opioid crisis. Similarly, press organizations have and likely will continue to report on these issues, and such reporting may result in adverse publicity for us, resulting in reputational harm.

The DEA regulates the availability of controlled substances, including APIs, drug products under development and marketed drug products. At times, the procurement and manufacturing quotas granted by the DEA may be insufficient to meet our needs.

        The DEA is the U.S. federal agency responsible for domestic enforcement of the Controlled Substances Act of 1970 ("CSA"). The CSA classifies drugs and other substances based on identified potential for abuse. Schedule I controlled substances, such as heroin and LSD, have a high abuse potential and have no currently accepted medical use; thus, they cannot be lawfully marketed or sold. Schedule II controlled substances include molecules such as oxycodone, oxymorphone, morphine, fentanyl, and hydrocodone. The manufacture, storage, distribution and sale of these controlled substances are permitted, but highly regulated.

        The DEA regulates the availability of APIs, products under development and marketed drug products that are in the Schedule II category by setting annual quotas. Every year, we must apply to the DEA for manufacturing quota to manufacture APIs and procurement quota to manufacture

22


finished dosage products. Given that the DEA has discretion to grant or deny our manufacturing and procurement quota requests, the quota the DEA grants may be insufficient to meet our expected needs. In 2018, manufacturing and procurement quotas granted by the DEA were sufficient to meet our sales and inventory requirements on most products. In November 2017, the DEA reduced the amount of almost every Schedule II opiate and opioid medication that may be manufactured in the United States in 2018 by 20%. In December 2018, the DEA reduced the amount of the six most frequently misused opioids that may be manufactured in the U.S. in calendar year 2019 by an average of 10% as compared to the 2018 amount and could take similar actions in the future. Future delay or refusal by the DEA to grant, in whole or in part, our quota requests could delay or result in stopping the manufacture of our marketed drug products, new product launches or the conduct of bioequivalence studies. Such delay or refusal also could require us to allocate marketed drug products among our customers. These factors, along with any delay or refusal by the DEA to provide customers who purchase API from us with sufficient quota, could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

After the separation, we expect to have substantial indebtedness.

        Immediately following the separation, we expect to bear a total combined indebtedness for borrowed money of approximately $[              ]. Our indebtedness may have important consequences, including:

    Limiting our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions and other corporate requirements;

    Limiting our flexibility in planning for, or reacting to, changes in the industry in which we compete;

    Limiting our ability to refinance our indebtedness on terms acceptable to us or at all;

    Requiring a significant portion of our cash flows to be dedicated to debt service payments, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes;

    Making us more vulnerable to economic downturns and limiting our ability to withstand competitive pressures;

    Placing us at a competitive disadvantage relative to other less leveraged competitors; and

    Increasing our costs of borrowing.

        See "Description of Material Indebtedness."

Our ability to generate sufficient cash to service all of our indebtedness depends on various factors, including our financial condition and operating performance, and is not assured.

        Our ability to make scheduled payments on or to refinance our expected debt obligations depends on various factors including our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors. Based on our operating performance and other developments in the future, we may be unable to maintain a level of cash flows sufficient to permit us to meet all of our obligations.

        If our cash flows and capital resources are insufficient to fund our debt service obligations and other cash requirements, we could face liquidity problems and could have to reduce or delay investments and capital expenditures or to sell assets or operations, seek additional capital or restructure or refinance our indebtedness. We may not be able to effect any such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, such alternative actions

23


may not allow us to meet our scheduled debt service obligations. The agreements governing our indebtedness may restrict our ability to take such alternative actions. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due.

        Any inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, could materially and adversely affect our financial position and results of operations. In the event of defaults, lenders under our then-outstanding indebtedness could declare their principal and interest to be due and payable, lenders under then-existing credit facilities could terminate their commitments to loan money, any secured lenders could foreclose against the assets securing such borrowings and we could be forced into bankruptcy or liquidation.

        We may also be able to incur substantial additional indebtedness in the future. Although agreements governing our expected indebtedness may restrict the incurrence of additional indebtedness, these restrictions are expected to be subject to a number of qualifications and exceptions and the additional indebtedness incurred in compliance with these restrictions could be substantial. If new debt is added to our expected debt levels, the related risks that we now face could intensify.

The terms of the agreements that will govern our indebtedness are expected to restrict our current and future operations.

        The agreements that will govern the terms of our indebtedness are expected to contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest.

        A breach of the covenants under the agreements that will govern the terms of any of our expected indebtedness could result in an event of default under the applicable indebtedness. Such default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In addition, an event of default under an agreement that governs any then-existing credit facility may permit the lenders under any such facility to terminate all commitments to extend further credit thereunder. Furthermore, if we are unable to repay the amounts due and payable secured indebtedness, those lenders will be able to proceed against the collateral granted to them to secure that indebtedness. If our debtholders accelerate the repayment of our borrowings, we may not have sufficient assets to repay that indebtedness.

        As a result of these restrictions, we may be:

    limited in how we conduct our business;

    unable to raise additional debt or equity financing to operate during general economic or business downturns; or

    unable to compete effectively, execute our growth strategy or take advantage of new business opportunities.

        These restrictions may affect our ability to grow in accordance with our plans.

Our expected variable-rate indebtedness exposes us to interest rate risk, which could cause our debt service obligations to increase significantly.

        Certain of our indebtedness is expected to be subject to variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable-rate indebtedness would increase and our net income would decrease, even though the amount borrowed under the facilities remained the same. An unfavorable movement in interest rates, primarily London

24


Interbank Offered Rate, could result in higher interest expense and cash payments. Although we may enter into interest rate swaps, involving the exchange of floating for fixed-rate interest payments, to reduce interest rate volatility, we cannot provide assurance that we will enter into such arrangements or that they will successfully mitigate such interest rate volatility.

Our debt levels following the separation and challenges in the commercial and credit environment may materially adversely affect our ability to issue debt on acceptable terms and/or our future access to capital.

        Our ability to issue debt or enter into other financing arrangements on acceptable terms could be materially adversely affected by our debt levels following the separation or if there is a material decline in the demand for our products or in the solvency of our customers or suppliers or if other significantly unfavorable changes in economic conditions occur. In addition, volatility in the world financial markets could increase borrowing costs or affect our ability to access the capital markets, which could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

We may need additional financing in the future to meet our capital needs or to make acquisitions, and such financing may not be available on favorable or acceptable terms, and may be dilutive to existing shareholders.

        We may need to seek additional financing for general corporate purposes. For example, we may need to increase our investment in R&D activities or need funds to make acquisitions. We may be unable to obtain any desired additional financing on terms that are favorable or acceptable to us. Depending on market conditions, adequate funds may not be available to us on acceptable terms and we may be unable to fund our expansion, successfully develop or enhance products, or respond to competitive pressures, any of which could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows. If we raise additional funds through the issuance of equity securities, our shareholders will experience dilution of their ownership interest.

The manufacture of our products is highly exacting and complex, and our business could suffer if we, or our suppliers, encounter manufacturing or supply problems.

        The manufacture of our products is highly exacting and complex, due in part to strict regulatory and manufacturing requirements, as well as due to the nature of some of our products which are inherently difficult to manufacture. Problems may arise during manufacturing for a variety of reasons, including equipment malfunction, failure to follow specific protocols and procedures, defective raw materials and environmental factors. If a batch of finished product fails to meet quality standards during a production run, then that entire batch of product may have to be discarded. These problems could lead to launch delays, product shortages, backorders, increased costs (including contractual damages for failure to meet supply requirements), lost revenue, damage to our reputation and customer relationships, time and expense spent investigating, correcting and preventing the root causes and, depending on the root causes, similar losses with respect to other products. If manufacturing problems are not discovered before the product is released to the market, we also could incur product recall and product liability costs. If we incur a product recall or product liability costs involving one of our products, such product could receive reduced market acceptance and thus reduced product demand and could harm our reputation and our ability to market our products in the future. Significant manufacturing problems could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

        We rely on third-party manufacturers to manufacture certain components of our products and certain of our finished products. In the event that these third-party manufacturers cease to manufacture sufficient quantities of our products or components in a timely manner and on terms acceptable to us, we could be forced to locate alternate third-party manufacturers. Additionally, if our third-party manufacturers experience a failure in their production process, are unable to obtain sufficient quantities

25


of the components necessary to manufacture our products or otherwise fail to meet regulatory or quality requirements, we may be forced to delay the manufacture and sale of our products or locate an alternative third-party manufacturer. Several of our products are manufactured at a single manufacturing facility or stored at a single storage site. Loss or damage to a manufacturing facility or storage site due to a natural disaster or otherwise could adversely affect our ability to manufacture sufficient quantities of key products or otherwise deliver products to meet customer demand or contractual requirements, which may result in a loss of revenue and other adverse business consequences. Furthermore, while we work closely with our suppliers to ensure the continuity of supply and to diversify our sources of components and materials, in certain instances, we do acquire components and materials from a sole supplier. Although we do maintain insurance to mitigate the potential risk related to any related supply disruption, there can be no assurance that such measures will be effective. Because of the time required to obtain regulatory approval and licensing of a manufacturing facility, an alternate third-party manufacturer may not be available on a timely basis to replace production capacity in the event we lose manufacturing capacity, experience supply challenges, or products are otherwise not available due to natural disaster, regulatory action or otherwise.

        Significant manufacturing problems could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

We may be unable to protect our intellectual property rights, intellectual property rights may be limited or we may be subject to claims that we infringe on the intellectual property rights of others.

        Our development of high-quality complex generic pharmaceutical products is dependent, in part, on our ability to either invalidate the Orange Book listed patents protecting the branded product for which we are seeking to launch a generic or develop a generic version of the branded product that does not infringe those patents. The development of these generic pharmaceutical products is characterized by extensive patent litigation, and we may from time to time be a party to such litigation. Companies that produce branded pharmaceutical products routinely bring litigation against manufacturers of generic products upon the filing of an Abbreviated New Drug Application ("ANDA") or similar submission that seek regulatory approval to manufacture and market generic forms of their branded products, alleging patent infringement or other violations of intellectual property rights. Patent holders may also bring patent infringement suits against companies that are currently marketing and selling approved generic products. Litigation often involves significant expense and can delay or prevent introduction or sale of our generic products. If the Orange Book patents listed for a branded product are held valid, enforceable and infringed by our products, we would, unless we could obtain a license from the patent holder, need to delay selling our corresponding generic product until the latest expiration of the Orange Book patents listed for the branded product. A successful claim of patent or other intellectual property infringement against us could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

        With respect to certain of our API products, we rely on a combination of patents, trademarks, trade secrets, proprietary know-how, market exclusivity gained from the regulatory approval process and other intellectual property to support our business strategy. However, our efforts to protect our intellectual property rights may not be sufficient. If we do not obtain sufficient protection for our intellectual property, or if we are unable to effectively enforce our intellectual property rights, or if there is a change in the way courts and regulators interpret the laws, rules and regulations applicable to our intellectual property, our competitiveness could be impacted, which could adversely affect our competitive position, business, financial condition, results of operations and cash flows. As further described under "Business—Legal Proceedings," the Company has been the subject of patent infringement litigation in connection with Xyrem and Mydayis.

        Our pending patent applications may not result in the issuance of patents, or the patents issued to or licensed by us in the past or in the future may be challenged or circumvented by competitors.

26


Existing patents may be found to be invalid or insufficiently broad to preclude our competitors from using methods or making or selling products similar or identical to those covered by our patents and patent applications. Competitors also may harm our sales by designing products that mirror the capabilities of our products or technology without infringing our patents.

        Regulatory agencies may refuse to grant us the market exclusivity that we were anticipating, or may unexpectedly grant market exclusivity rights to other parties. In addition, our ability to obtain and enforce intellectual property rights is limited by the unique laws of each country. Competitors may diminish the value of our trade secrets by reverse engineering or by independent invention. Additionally, current or former employees may improperly disclose such trade secrets to competitors or other third parties. We may not become aware of any such improper disclosure, and, in the event we do become aware, we may not have an adequate remedy available to us.

        There may be situations in which we may make business and legal judgments to market and sell products that are subject to claims of alleged patent infringement prior to final resolution of those claims by the courts based upon our belief that such patents are invalid, unenforceable or are not infringed by our marketing and sale of such products. This is referred to in the pharmaceutical industry as an "at-risk" launch. The risk involved in an at-risk launch can be substantial because, if a patent holder ultimately prevails against us, the remedies available to such holder may include, among other things, damages calculated based on the profits lost by the patent holder, which can be significantly higher than the profits we make from selling the generic version of the product. Moreover, if a court determines that such infringement is willful, the damages could be subject to trebling. We could face substantial damages from adverse court decisions in such matters. We could also be at risk for the value of such inventory that we are unable to market or sell.

Extensive laws and regulations govern the industry in which we operate and any failure to comply with such laws and regulations, including any changes to those laws and regulations, may materially adversely affect us.

        The development, manufacture, marketing, sale, promotion, and distribution of our products are subject to comprehensive government regulations that govern and influence the development, testing, manufacturing, processing, packaging, holding, record keeping, safety, efficacy, approval, advertising, promotion, sale, distribution and import/export of our products.

        Under these laws and regulations, we are subject to periodic inspection of our facilities, procedures and operations and/or the testing of our products by the FDA, the DEA and similar authorities within and outside the U.S., which conduct periodic inspections to confirm that we are in compliance with all applicable requirements. We are also required to track and report adverse events and product quality problems associated with our products to the FDA and other regulatory authorities. Failure to comply with the requirements of the FDA or other regulatory authorities, including a failed inspection or a failure in our adverse event reporting system, or any other unexpected or serious health or safety concerns associated with our products could result in adverse inspection reports, warning letters, product recalls or seizures, product liability claims, labeling changes, monetary sanctions, injunctions to halt the manufacture and distribution of products, civil or criminal sanctions, refusal of a government to grant approvals or licenses, restrictions on operations or withdrawal of existing approvals and licenses. Any of these actions could cause a loss of customer confidence in our products, which could adversely affect our sales, or otherwise have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows. In addition, the requirements of regulatory authorities, including interpretative guidance, are subject to change and compliance with additional or changing requirements or interpretative guidance may subject us to further review, result in product delays or otherwise increase our costs, and thus have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

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Consolidation of our customer base and commercial alliances among our customers may materially adversely affect us.

        A significant percentage of our generic drug sales are made to relatively few distributors who subsequently sell our products to retail pharmacy chains, independent pharmacies, government entities, hospitals and long-term care providers. These customers have undergone significant consolidation and formed various commercial alliances in recent years. There are three key drug purchasing groups or alliances that account for more than 90% of generic drug purchases from manufacturers in the U.S. The consolidation of our customer base, combined with a growing number of competitors driven by accelerated regulatory approval times, has led to increased pricing pressure on our generic products. Due to these market dynamics, we expect the trend of increased pricing pressures from our customers and price erosion in the U.S. generics market to continue.

        Other external factors that could lead to disruption in the generics supply chain include:

    The recent acquisition of PillPack by Amazon.com, Inc. and its announced intention to join forces with Berkshire Hathaway and J.P. Morgan Chase to form an independent health care company;

    The formation of Civica Rx, a nonprofit organization comprised of seven hospital systems and three charitable foundations, announcing it will manufacture generic drugs or sub-contract manufacturing to trusted supply partners to make generics more affordable and accessible; and

    Further vertical integration between prescription benefit managers and insurers.

        These changes to the traditional supply chain could lead to our customers having increased negotiating leverage and result in additional price erosion.

        Our net sales may also be affected by fluctuations in customer buying patterns, DEA quota, seasonality and other factors. In addition, since a significant portion of our revenue is derived from relatively few key customers, any financial difficulties experienced by a single key customer, or any delay in receiving payments from such a customer, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

If our business development activities are unsuccessful, it may adversely affect us.

        Part of our business strategy includes evaluating potential business development opportunities to grow the business through merger, acquisition, licensing agreements or other strategic transactions. The process to evaluate potential opportunities may be complex, time-consuming and expensive. Once a potential opportunity is identified, we may not be able to conclude negotiations of a potential transaction on terms that are satisfactory to us, which could result in a significant diversion of management and other employee time, as well as substantial out-of-pocket costs. In addition, there are a number of risks and uncertainties relating to our ability to close a potential transaction.

        Once an acquisition or licensing transaction is consummated, there are further potential risks related to integration activities, including with regard to operations, personnel, technologies and products. If we are not able to successfully integrate our acquisitions in the expected time frame, we may not obtain the advantages and synergies that such acquisitions were intended to create, which may have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

        In addition, we intend to continue to explore opportunities to enter into strategic collaborations with other parties, which may include other pharmaceutical companies, academic and research institutions, government agencies and other public and private research organizations. These third-party collaborators are often directly responsible for certain obligations under these types of arrangements, and we may not have the same level of decision-making capabilities for the prioritization and

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management of development-related activities as we would for our internal research and development activities. Failures by these partners to meet their contractual, regulatory, or other obligations to us, or any disruption in the relationships with these partners, could have a material adverse effect on our pipeline and business. In addition, these collaborative relationships for research and development could extend for many years and may give rise to disputes regarding the relative rights, obligations and revenues of us versus our partners, including the ownership of intellectual property and associated rights and obligations. These could result in the loss of intellectual property rights or other intellectual property protections, delay the development and sale of potential products, and lead to lengthy and expensive litigation or arbitration.

        Furthermore, the due diligence that we conduct in conjunction with an acquisition or other strategic collaboration may not sufficiently discover risks and contingent liabilities associated with the other party and, consequently, we may consummate an acquisition or otherwise enter into a strategic collaboration for which the risks and contingent liabilities are greater than were projected. In addition, in connection with acquisitions or other strategic collaborations, we could experience disruption in our business, technology and information systems, and with our customers, licensors, suppliers and employees, and may face difficulties in managing the expanded operations of a larger and more complex company. There is also a risk that key employees of companies that we acquire or key employees necessary to successfully commercialize technologies and products that we acquire or otherwise collaborate on may seek employment elsewhere, including with our competitors. Furthermore, there may be overlap between our products or customers and the companies which we acquire or enter into strategic collaborations with that may create conflicts in relationships or other commitments detrimental to the integrated businesses or impacted products. Additionally, the time between our expenditures to acquire new products, technologies or businesses and the subsequent generation of revenues from those acquired products, technologies or businesses, or the timing of revenue recognition related to licensing agreements and/or strategic collaborations, could cause fluctuations in our financial performance from period to period. Finally, if we are unable to successfully integrate products, technologies, businesses or personnel that we acquire, we could incur significant impairment charges or other adverse financial consequences. Many of these factors are outside of our control and any one of them could result in increased costs, decreases in the amount of expected revenues and diversion of management's time and energy, which could materially impact our business, financial condition, results of operations and cash flows.

If we fail to successfully identify, develop and secure regulatory approval for additional generic pharmaceutical products or fail to introduce these generic products on a timely basis, our business, financial condition, results of operations and cash flows may decline.

        We may not be successful in our efforts to continue to create a pipeline of product candidates or develop commercially successful products. Identifying, developing and obtaining regulatory approval and commercializing additional product candidates is prone to risks of failure inherent in drug development. For example, our research programs may initially show promise in identifying potential additional product candidates, yet fail to yield results for a number of reasons, including, among others, that the research methodology used may not be successful in identifying potential additional product candidates. No assurance can be given that we will be able to successfully identify additional product candidates, advance any of these additional product candidates through the development process or successfully commercialize any such additional product candidates. If we are unable to successfully identify, develop and commercialize additional product candidates, it could materially impact our business, financial condition, results of operations and cash flows.

        Even if we are able to identify and develop additional product candidates, we may fail to obtain exclusive marketing rights for such product candidates or fail to introduce such product candidates on a timely basis. Subject to certain exceptions and limitations, the Hatch-Waxman amendments to the

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Federal Food, Drug, and Cosmetic Act ("FFDCA") provide for a period of 180 days of marketing exclusivity for a generic version of a previously approved drug for any applicant that is the first to file an ANDA containing a certification of invalidity, non-infringement or unenforceability related to a patent listed with respect to the corresponding brand-name drug (known as a "Paragraph IV certification"). ANDAs that contain Paragraph IV certifications challenging patents, however, generally become the subject of patent litigation that can be both lengthy and costly. There is no certainty that we will prevail in any such litigation, that we will be the first-to-file and be granted the 180-day marketing exclusivity period, or, if we are granted the 180-day marketing exclusivity period, that we will not forfeit such period. Even where we are awarded marketing exclusivity, we may be required to share our exclusivity period with other ANDA applicants who submit Paragraph IV certifications. In addition, brand-name pharmaceutical companies often authorize a generic version of the corresponding brand-name drug to be sold during any period of marketing exclusivity that is awarded. Authorized generics are not prohibited from sale during the 180-day marketing exclusivity period. Furthermore, timely commencement of the litigation by the patent owner imposes an automatic stay of ANDA approval by the FDA for 30 months, unless the case is decided in the ANDA applicant's favor during that period. Finally, if the court decision is adverse to the ANDA applicant, the ANDA approval will be delayed until the challenged patent expires, and the applicant will not be granted 180 days of marketing exclusivity.

        Our ability to timely bring our products to market is dependent upon, among other things, the timing of regulatory approval of our products, which to a large extent is outside of our control, as well as the timing of competing products. If any of our products are not approved timely, or if we are unable to obtain and realize the full benefits of the respective market exclusivity period for our products, or if our products cannot be successfully manufactured or commercialized timely, our results of operations could be materially adversely affected. In addition, we cannot guarantee that any investment we make in developing products will be recouped, even if we are successful in commercializing those products. Finally, once developed and approved, new products may fail to achieve commercial acceptance due to the price of the product, third-party reimbursement of the product and the effectiveness of sales and marketing efforts to support the product.

If we encounter negative developments with respect to our existing products, or are unable to successfully introduce new products, it may materially adversely affect our business.

        We sell a wide variety of products including specialty generic pharmaceuticals and APIs. Our ability to maintain and increase net sales depends on several factors, including:

    our ability to increase market demand for our products and our ability to implement and maintain pricing;

    our ability to develop additional products for commercialization;

    our ability to achieve hospital and other third-party payer formulary acceptance, and maintain reimbursement levels by third-party payers;

    our ability to maintain fees and discounts payable to the wholesalers and distributors and group purchasing organizations, at commercially reasonable levels;

    whether the U.S. Department of Justice ("DOJ") or third parties seek to challenge and are successful in challenging patents or patent-related settlement agreements or our sales and marketing practices;

    warnings or limitations that may be required to be added to FDA-approved labeling; and

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    the occurrence of adverse side effects related to or emergence of new information related to the therapeutic efficacy of these products, and any resulting product liability claims or product recalls.

Sales of our products are affected by, and we may be negatively impacted by any changes to, the reimbursement practices of governmental health administration authorities, private health coverage insurers and other third-party payers.

        Sales of our products depend, in part, on the extent to which the costs of our products are reimbursed by governmental health administration authorities, private health coverage insurers and other third-party payers. The ability of patients to obtain appropriate reimbursement for products and services from these third-party payers affects the selection of products they purchase and the prices they are willing to pay. Our ability to commercialize our products depends, in part, on the extent to which reimbursement for the costs of these products is available from government healthcare programs, such as Medicaid and Medicare, private health insurers and others. We cannot be certain that, over time, third-party reimbursements for our products will be adequate for us to maintain price levels sufficient for realization of an adequate return on our investment.

        Furthermore, we are unable to predict what additional legislation or regulation or changes in third-party coverage and reimbursement policies may be enacted or issued in the future or what effect such legislation, regulation and policy changes would have on our business.

Our reporting and payment obligations under the Medicare and Medicaid rebate programs, and other governmental purchasing and rebate programs, are complex. Any determination of failure to comply with these obligations or those relating to healthcare fraud and abuse laws could have a material adverse effect on our business.

        The regulations regarding reporting and payment obligations with respect to Medicare and Medicaid reimbursement programs, and rebates and other governmental programs, are complex. Because our processes for these calculations and the judgments used in making these calculations involve subjective decisions and complex methodologies, these accruals may have a higher inherent risk for material changes in estimates. In addition, they are subject to review and challenge by the applicable governmental agencies, and it is possible that such reviews could result in material adjustments to amounts previously paid.

        Any governmental agencies that have commenced, or may commence, an investigation of Mallinckrodt Inc. relating to the sales, marketing, pricing, quality or manufacturing of pharmaceutical products could seek to impose, based on a claim of violation of fraud and false claims laws or otherwise, civil and/or criminal sanctions, including fines, penalties and possible exclusion from federal healthcare programs, including Medicare and Medicaid. Some of the applicable laws may impose liability even in the absence of specific intent to defraud. Furthermore, should there be ambiguity with regard to how to properly calculate and report payments, and even in the absence of any such ambiguity, a governmental authority may take a position contrary to a position we have taken, and may impose civil and/or criminal sanctions. Any such penalties or sanctions that we might become subject to could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

        In November 2014, we received a civil investigative demand from the Civil Medicaid Fraud Division of the Texas Attorney General's Office stating that it was investigating the possibility of false reporting of information by us regarding the prices of certain of our drugs used by Texas Medicaid to establish reimbursement rates for pharmacies that dispensed our drugs to Texas Medicaid recipients. We responded to these requests and, in December 2018, entered into a final settlement with the Texas Attorney General's Office to resolve all potential claims in the investigation.

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We may not achieve the anticipated benefits of price increases enacted on our pharmaceutical products, which may adversely affect our business.

        From time to time, we may initiate price increases on certain of our pharmaceutical products. There is no guarantee that our customers will be receptive to these price increases and continue to purchase the products at historical quantities. In addition, it is unclear how market participants will react to price increases. For example, following pricing actions in specialty generics in fiscal 2015, additional competitors entered the marketplace for several of these products and prices subsequently decreased substantially. If customers do not maintain or increase existing sales volumes, we may be unable to replace lost sales with orders from other customers, and it could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

We may not achieve some or all of the expected benefits of any restructuring activities we may undertake and such restructuring activities may adversely affect our business.

        From time to time, we may initiate restructuring activities as we continue to realign our cost structure due to the changing nature of our business and look for opportunities to achieve operating efficiencies that will reduce costs. We may not be able to obtain the cost savings and benefits initially anticipated when such restructuring activities were initiated. Additionally, as a result of such restructuring activities we may experience a loss of continuity, loss of accumulated knowledge and/or inefficiency during transitional periods. Reorganizations and restructurings can require a significant amount of management and other employees' time and focus, which may divert attention from operating and growing our business. If we fail to achieve some or all of the expected benefits of such restructuring activities, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We face significant competition and may not be able to compete effectively.

        The industries in which we operate are highly competitive. Competition takes many forms, such as price reductions on products that are comparable to our own, development of new products with different mechanisms that obviate the need for our treatments or that may be more cost-effective than or have performance superior to our products. This competition may limit the effectiveness of any price increases we initiate. Following any price increase by us, competitors may elect to maintain a lower price point that may result in a decline in our sales volume. For further discussion on the competitive nature of our business, refer to the section of this information statement entitled "Business—Competition." Our failure to compete effectively could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

We may incur product liability losses and other litigation liability.

        We are or may be involved in various legal proceedings and certain government inquiries and investigations, including with respect to, but not limited to, patent infringement, product liability, personal injury, antitrust matters, securities class action lawsuits, breach of contract, Medicare and Medicaid reimbursement claims, opioid-related matters, promotional practices and compliance with laws relating to the manufacture and sale of controlled substances. Such proceedings, inquiries and investigations may involve claims for, or the possibility of, fines and penalties involving substantial amounts of money or other relief, including but not limited to civil or criminal fines and penalties, changes in business practices and exclusion from participation in various government healthcare-related programs. Such litigation and related matters are described in the section of this information statement entitled "Business—Legal Proceedings." If any of these legal proceedings, inquiries or investigations were to result in an adverse outcome, the impact could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

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        With respect to product liability risks, in the ordinary course of business we are subject to liability claims and lawsuits, including potential class actions, alleging that our products have caused, or could cause, serious adverse events or other injury. Any such claim brought against us, with or without merit, could be costly to defend and could result in an increase in our insurance premiums. We retain liability for $10.0 million per claim of the first $40.0 million of a loss in our primary liability policies and purchase an additional $135.0 million using a combination of umbrella/excess liability policies with respect to any such claims. We believe this coverage level is adequate to address our current risk exposure related to product liability claims and lawsuits. However, some claims, such as those brought against us related to our sale of opioids, might not be covered by our insurance policies. Moreover, where the claim is covered by our insurance, if our insurance coverage is inadequate, we would have to pay the amount of any settlement or judgment that is in excess of our policy limits. We may not be able to obtain insurance on terms acceptable to us or at all since insurance varies in cost and can be difficult to obtain. Our failure to maintain adequate insurance coverage or successfully defend against product liability claims could have a material adverse effect on our business, financial condition, results of operations and cash flows.

The healthcare industry has been under increasing scrutiny from governments, legislative bodies and enforcement agencies related to its sales, marketing and pricing practices, and changes to, or non-compliance with, relevant policies, laws, regulations or government guidance may result in actions that could adversely affect our business.

        In the U.S. over the past several years, a significant number of pharmaceutical companies have been subject to inquiries and investigations by various federal and state regulatory, investigative, prosecutorial and administrative entities in connection with sales, marketing and pricing practices, including the DOJ and various other agencies, including the Office of the Inspector General within the Department of Health and Human Services ("OIG"), the FDA, the Federal Trade Commission and various state Attorneys General offices. These investigations have alleged violations of various federal and state laws and regulations, including claims asserting antitrust violations, violations of the Food, Drug and Cosmetic Act, the False Claims Act, the Prescription Drug Marketing Act, anti-kickback laws, data and patient privacy laws, export and import laws, consumer protection laws and other alleged violations in connection with the promotion of products for unapproved uses, pricing and Medicare and/or Medicaid reimbursement. The DOJ and the SEC have also increased their focus on the enforcement of the Foreign Corrupt Practices Act of 1977 ("FCPA"), particularly as it relates to the conduct of pharmaceutical companies.

        Many of these investigations originate as "qui tam" actions under the False Claims Act. Under the False Claims Act, any individual can bring a claim on behalf of the government alleging that a person or entity has presented a false claim, or caused a false claim to be submitted, to the government for payment. The person bringing a "qui tam" suit is entitled to a share of any recovery or settlement. Qui tam suits, also commonly referred to as "whistleblower suits," are often brought by current or former employees. In a qui tam suit, the government must decide whether to intervene and prosecute the case. If the government declines to intervene and prosecute the case, the individual may pursue the case alone. If the FDA or any other governmental agency initiates an enforcement action against us or if we are the subject of a qui tam suit and it is determined that we violated prohibitions relating to the promotion of products for unapproved uses in connection with past or future activities, we could be subject to substantial civil or criminal fines or damage awards and other sanctions such as the possible exclusion from federal healthcare programs, including Medicare and Medicaid, consent decrees and corporate integrity agreements pursuant to which our activities would be subject to ongoing scrutiny and monitoring to ensure compliance with applicable laws and regulations. Any such fines, awards or other sanctions could have an adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

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Our operations expose us to the risk of violations of applicable health, safety and environmental laws and regulations, and related (and potentially material) liabilities and litigation.

        We are subject to numerous federal, state, local and non-U.S. environmental protection and health and safety laws and regulations governing, among other things:

    the generation, storage, use and transportation of hazardous materials;

    emissions or discharges of substances into the environment;

    investigation and remediation of hazardous substances or materials at various sites;

    chemical constituents in products and end-of-life disposal, mandatory recycling and take-back programs; and

    the health and safety of our employees.

        We may not have been, or we may not at all times be, in full compliance with environmental and health and safety laws and regulations. In the event a regulatory authority concludes that we are not in full compliance with these laws, we could be fined, criminally charged or otherwise sanctioned. Environmental laws are becoming more stringent, including outside the U.S., resulting in increased costs and compliance burdens.

        Certain environmental laws assess liability on current or previous owners of real property and current or previous owners or operators of facilities for the costs of investigation, removal or remediation of hazardous substances or materials at such properties or at properties at which parties have disposed of hazardous substances. Liability for investigative, removal and remediation costs under certain federal and state laws is retroactive, strict (i.e., can be imposed regardless of fault), and joint and several. In addition to cleanup actions brought by governmental authorities, private parties could bring personal injury or other claims due to the presence of, or exposure to, hazardous substances. We have received notification from the U.S. Environmental Protection Agency ("EPA") and similar state environmental agencies that conditions at a number of sites where the disposal of hazardous substances has taken place requires investigation, cleanup and other possible remedial action. These agencies may require that we reimburse the government for its costs incurred at these sites or otherwise pay for the costs of investigation and cleanup of these sites, including by providing compensation for natural resource damage claims arising from such sites.

        In the ordinary course of our business planning process, we take into account our known environmental matters as we plan for our future capital requirements and operating expenditures. The ultimate cost of site cleanup and timing of future cash outflows is difficult to predict, given the uncertainties regarding the extent of the required cleanup, the interpretation of applicable laws and regulations, and alternative cleanup methods.

        While we have planned for future capital and operating expenditures to comply with environmental laws, our costs of complying with current or future environmental protection and health and safety laws and regulations, or our liabilities arising from past or future releases of, or exposures to, hazardous substances may exceed our estimates or could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows. We may also be subject to additional environmental claims for personal injury or cost recovery actions for remediation of facilities in the future based on our past, present or future business activities.

If we are unable to recruit or retain key personnel, we may be unable to maintain or expand our business.

        Because of the specialized scientific nature of our business, our ability to develop products and to compete with our current and future competitors will remain highly dependent, in large part, upon our ability to recruit and retain qualified scientific, technical, regulatory and commercial personnel. The loss

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of key scientific, technical, regulatory and commercial personnel, or the failure to recruit additional key scientific, technical, regulatory and commercial personnel, could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows. There is intense competition for qualified personnel in the areas of our activities, and we may not be able to recruit and retain the qualified personnel necessary for the development or operation of our business.

Our global operations expose us to risks and challenges associated with conducting business internationally.

        We operate globally with offices or activities in Europe, Africa, Asia, South America, Australia and North America. We face several risks inherent in conducting business internationally, including compliance with international and U.S. laws and regulations that apply to our international operations. These laws and regulations include data privacy requirements, labor relations laws, tax laws, anti-competition regulations, import and trade restrictions, export requirements, U.S. laws, such as the FCPA and local laws, which also prohibit corrupt payments to governmental officials or certain payments or remunerations to customers. Given the high level of complexity of these laws, there is a risk that some provisions may be violated, inadvertently or through fraudulent or negligent behavior of individual employees, or through our failure to comply with certain formal documentation requirements or otherwise. Violations of these laws and regulations could result in fines or criminal sanctions against us, our officers or our employees, and prohibitions on the conduct of our business. Any such violations could include prohibitions on our ability to offer our products in one or more countries and could materially damage our reputation, our brand, any international expansion efforts and our ability to attract and retain employees.

        In addition to the foregoing, engaging in international business inherently involves a number of other difficulties and risks, including:

    potentially longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain non-U.S. legal systems;

    potential inability to sell products into certain countries given the delay of foreign governments in responding to changes in our U.S. business licensing;

    political and economic instability, including the impact of the 2016 referendum by British voters to exit the European Union (commonly known as Brexit) and the related uncertainties;

    the unpredictability of U.S. trade policy, including Section 301 tariffs and U.S. trade relations with other countries, that may increase raw material cost or impact our ability to obtain the raw materials we need to manufacture our products and impact our ability to sell our products outside of the U.S.;

    potentially adverse tax consequences, tariffs, customs charges, bureaucratic requirements and trade barriers;

    difficulties and costs of staffing and managing our non-U.S. operations;

    exposure to global economic conditions; and

    exposure to potentially unfavorable movements in foreign currency exchange rates associated with international net sales and operating expense and intercompany debt financings.

        These or other factors or any combination of them may have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

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Our business depends on the continued effectiveness and availability of our information technology infrastructure, and failures of this infrastructure could harm our operations.

        To remain competitive in our industry, we must employ information technologies to support manufacturing processes, quality processes, distribution, and financial reporting, as well as R&D and regulatory applications that capture, manage and analyze information in compliance with applicable regulatory requirements. We rely extensively on technology to allow concurrent work sharing. As with all information technology, our systems are vulnerable to potential damage or interruptions from fires, blackouts, telecommunications failures and other unexpected events, as well as physical and electronic break-ins, sabotage, piracy or intentional acts of vandalism. Given the extensive reliance of our business on technology, any substantial disruption or resulting loss of data that is not avoided or corrected by our backup measures could harm our business, financial condition, results of operations and cash flows. In addition, any unauthorized access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and regulatory penalties, disrupt our operations, and damage our reputation, and cause a loss of confidence in our products and services, which could adversely affect our business. Lastly, as a highly regulated business, it is important for us to maintain the integrity of our systems and data through structured processes and controls. Failure of the controls could result in business disruption and lack of compliance.

We are increasingly dependent on information technology and our systems and infrastructure face certain risks, including cybersecurity and data leakage risks.

        Significant disruptions to our information technology systems or breaches of information security could adversely affect our business. We are increasingly dependent on sophisticated information technology systems and infrastructure to operate our business. In the ordinary course of business, we collect, store and transmit large amounts of confidential information, and it is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information. We also have outsourced significant elements of our operations to third parties, some of which are outside the U.S., including some of our information technology infrastructure, and as a result we are managing many independent vendor relationships with third parties who may or could have access to our confidential information. The size and complexity of our information technology systems, and those of our third-party vendors with whom we contract, make such systems potentially vulnerable to service interruptions. The size and complexity of our and our vendors' systems and the large amounts of confidential information that is present on them also makes them potentially vulnerable to security breaches from inadvertent or intentional actions by our employees, partners or vendors, or from attacks by malicious third parties. We and our vendors could be susceptible to third-party attacks on our information security systems, which attacks are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives and expertise, including criminal groups, "hackers" and others. Maintaining the secrecy of this confidential, proprietary, and/or trade secret information is important to our competitive business position. However, such information can be difficult to protect. While we have taken steps to protect such information and invested heavily in information technology, there can be no assurance that our efforts will prevent service interruptions or security breaches in our systems or the unauthorized or inadvertent wrongful use or disclosure of confidential information, including those caused by our own employees or others to whom we have granted access to our systems, that could adversely affect our business operations or result in the loss, dissemination, or misuse of critical or sensitive information. A breach of our security measures or the accidental loss, inadvertent disclosure, unapproved dissemination, misappropriation or misuse of trade secrets, proprietary information, or other confidential information, whether as a result of theft, hacking, human error, sabotage, industrial espionage, fraud, trickery or other forms of deception, or for any other cause, could enable others to produce competing products, use our proprietary technology or information, and/or adversely affect our business position. Further, any such interruption, security breach, loss or disclosure of confidential information, could result in financial, legal, business, and

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reputational harm to us and could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

We are subject to labor and employment laws and regulations, which could increase our costs and restrict our operations in the future.

        We employ approximately 1,600 employees worldwide. Some of our employees are represented by labor organizations and national works councils. Our management believes that our employee relations are satisfactory. However, further organizing activities or collective bargaining may increase our employment-related costs and we may be subject to work stoppages and other labor disruptions. Moreover, if we are subject to employment-related claims, such as individual and class actions relating to alleged employment discrimination, wage-hour and labor standards issues, and such actions are successful in whole or in part, this may affect our ability to compete or have a material adverse effect on our business, financial condition and results of operations.

Our operations may be interrupted by the occurrence of a natural disaster or other catastrophic event at our facilities.

        We depend on our manufacturing facilities, laboratories and equipment for the continued operation of our business. Our research and development, manufacturing and administrative facilities are primarily conducted in Saint Louis, Missouri; Hobart, New York; Raleigh, North Carolina; and Greenville, Illinois. Although we have contingency plans in effect for natural disasters or other catastrophic events, these events could still disrupt our operations. Even though we carry business interruption insurance policies, we may suffer losses as a result of business interruptions that exceed the coverage available under our insurance policies. Any natural disaster or catastrophic event at any of our facilities could have a significant negative impact on our business, financial condition and results of operations.

Risks Related to the Separation

We have no recent history operating as an independent company, and our historical and pro forma financial information is not necessarily representative of the results that we would have achieved as a separate, publicly traded company and may not be an accurate indicator of our future results of operations.

        The historical information about Mallinckrodt Inc. in this information statement refers to our business as operated by and integrated with Parent. Our historical and pro forma financial information included in this information statement is derived from the consolidated financial statements and accounting records of Parent. Accordingly, the historical and pro forma financial information included in this information statement does not reflect the financial condition, results of operations or cash flows that we would have achieved as a separate, publicly traded company during the periods presented or those that we will achieve in the future primarily as a result of the factors described below:

    Our business has historically been operated by Parent as part of its broader corporate organization, rather than as an independent company. Parent or one of its affiliates performed various corporate functions for Mallinckrodt Inc., such as accounting, information technology and finance. Following the separation, Parent will provide some of these functions to us for a period of time, as described in "Our Relationship with Parent Following the Distribution." Our historical and pro forma financial results reflect allocations of corporate expenses from Parent for such functions and are likely to be less than the expenses we would have incurred had we operated as a separate, publicly traded company. In addition, we expect to incur additional annual expenses related to the separation, including with respect to, among other things, directors and officers liability insurance, director fees, reporting fees with the SEC, NYSE listing fees, transfer agent fees, and increased auditing and legal fees, which expenses may be

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      significant. We will need to make significant investments to replicate or outsource from other providers certain facilities, systems, infrastructure and personnel to which we will no longer have access after our separation from Parent. These initiatives to develop our independent ability to operate without access to Parent's existing operational and administrative infrastructure will be costly to implement. We may not be able to operate our business efficiently or at comparable costs, and our profitability may decline;

    Generally, our working capital and capital for our general corporate purposes have historically been provided as part of the corporate-wide cash management policies of Parent. Following the completion of the separation, we may need to obtain additional financing from lenders, through public offerings or private placements of debt or equity securities, strategic relationships or other arrangements;

    After the completion of the separation, the cost of capital for our business may be higher than Parent's cost of capital prior to completion of the separation;

    Our historical financial information does not reflect the debt that we will incur as part of the separation; and

    Currently, we are able to use Parent's purchasing power in procuring various goods and services and have shared economies of scope and scale in vendor relationships. As a standalone company, we may be unable to obtain goods and services at the prices and terms obtained prior to completion of the separation, which could decrease our overall profitability.

        Other significant changes may occur in our cost structure, management, financing and business operations as a result of operating as a company separate from Parent. For additional information about the past financial performance of our business and the basis of presentation of the historical combined financial statements and the unaudited pro forma combined financial statements of our business, see "Unaudited Pro Forma Condensed Combined Financial Statements," "Selected Historical Combined Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical financial statements and accompanying notes included elsewhere in this information statement.

Parent's plan to separate the Mallinckrodt Inc. Business from the remainder of its business is subject to various risks and uncertainties and may not be completed in accordance with the expected plans or anticipated timeline, or at all, and will involve significant time and expense, which could disrupt or adversely affect our business.

        On December 6, 2018, Parent announced plans to separate the Mallinckrodt Inc. Business from the remainder of its business, as further described under "The Separation." The separation is subject to approval by Parent's board of directors of the final terms of the separation and certain other conditions. Unanticipated developments, including changes in the competitive conditions of the Mallinckrodt Inc. Business and Parent's remaining business, regulatory approvals or clearances, the availability of any consents of third parties on terms acceptable to us or at all, the uncertainty of the financial markets (including in relation to our ability to incur expected indebtedness in connection with the separation) and challenges in executing the separation, could delay or prevent the completion of the proposed separation, or cause the separation to occur on terms or conditions that are different or less favorable than expected. We expect that the process of completing the proposed separation will be time-consuming and involve significant costs and expenses, which may be significantly higher than what we currently anticipate and may not yield a discernible benefit if the separation is not completed or is not well executed. Executing the proposed separation will require significant time and attention from our senior management and employees, which could adversely affect our business and results of operations. We may also experience increased difficulties in attracting, retaining and motivating

38


employees during the pendency of the separation and following its completion, which could harm our businesses.

As we build our information technology infrastructure and transition our data to our own systems, we could incur substantial additional costs and experience temporary business interruptions.

        After the separation, we will continue to install and implement information technology infrastructure to support our critical business functions, including systems relating to accounting and reporting, manufacturing process control, customer service, inventory control and distribution. We may incur temporary interruptions in business operations if we cannot transition effectively from Parent's existing transactional and operational systems and data centers and the transition services that support these functions as we replace these systems. We may not be successful in effectively and efficiently implementing our new systems and transitioning our data, and we may incur substantially higher costs for implementation than currently anticipated. Our failure to avoid operational interruptions as we implement the new systems and replace Parent's information technology services, or our failure to implement the new systems and replace Parent's services effectively and efficiently, could disrupt our business and could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

Our accounting and other management systems and resources may not be adequately prepared to meet the financial reporting and other requirements to which we will be subject following the separation.

        Our financial results previously were included within the consolidated results of Parent, and our reporting and control systems were appropriate for those of subsidiaries of a public company. Prior to the effectiveness of our registration statement on Form 10 of which this information statement forms a part, we were not directly subject to reporting and other requirements of the Exchange Act and Section 404 of the Sarbanes-Oxley Act. After the distribution, we will be subject to such reporting and other requirements as they apply to "emerging growth companies" (as defined in the JOBS Act), which will require, among other things, annual management assessments of the effectiveness of our internal controls over financial reporting. These and other obligations will place significant demands on our management, administrative and operational resources, including accounting and information technology resources.

        To comply with these requirements, we anticipate that we will need to upgrade our systems, including computer hardware infrastructure, implement additional financial and management controls, reporting systems and procedures and hire additional accounting, finance and information technology staff. If we are unable to upgrade our financial and management controls, reporting systems, information technology and procedures in a timely and effective fashion, our ability to comply with our financial reporting requirements and other rules that apply to reporting companies could be impaired. Moreover, until we complete the creation of the corporate infrastructure necessary to operate as an independent public company, including hiring of additional staff and establishment of financial reporting information systems, we will be reliant on Parent for services relating to some of our internal controls over financial reporting. Any failure to achieve and maintain effective internal controls could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

        For as long as we are an emerging growth company under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act. An independent assessment of the effectiveness of our internal controls could detect problems that management's assessment might not. Undetected material weaknesses in our internal controls could lead to restatements of our financial statements and require us to incur the expense of remediation.

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We may have received more favorable terms from unaffiliated third parties than the terms we will receive in our agreements with Parent.

        We will enter into agreements with Parent in connection with the separation, including a separation and distribution agreement, a transition services agreement, a tax matters agreement and an employee matters agreement. Since such agreements were negotiated in the context of a separation, the terms of such agreements may be less favorable to us than the terms that would have resulted from arm's-length negotiations between unaffiliated third parties. See "Our Relationship with Parent Following the Distribution."

Parent may fail to perform under various transaction agreements that will be executed as part of the separation or we may fail to have necessary systems and services in place when certain of the transaction agreements expire.

        In connection with the separation, Mallinckrodt Inc. and Parent will enter into a separation and distribution agreement and will enter into various other agreements, including a transition services agreement, a tax matters agreement and an employee matters agreement. These agreements are discussed in greater detail in "Our Relationship with Parent Following the Distribution." Certain of these agreements will provide for the performance of services by each company for the benefit of the other for a period of time after the separation. We will rely on Parent to satisfy its performance and payment obligations under these agreements. If Parent is unable to satisfy its obligations under these agreements, including its indemnification obligations, we could incur operational difficulties or losses.

        If we do not have in place our own systems and services, or if we do not have agreements with other providers of these services when the transaction or long-term agreements terminate, we may not be able to operate our business effectively and our profitability may decline. We are in the process of creating our own, or engaging third parties to provide, systems and services to replace many of the systems and services Parent currently provides to us. These systems and services may also be more expensive or less efficient than the systems and services Parent is expected to provide during the transition period.

Potential indemnification liabilities to Parent pursuant to the separation and distribution agreement could materially adversely affect us.

        The separation and distribution agreement with Parent will provide for, among other things, the principal corporate transactions required to effect the separation, certain conditions to the distribution and provisions governing the relationship between Mallinckrodt Inc. and Parent following the separation. For a description of the separation and distribution agreement, see "Our Relationship with Parent Following the Distribution—Separation and Distribution Agreement." Among other things, the separation and distribution agreement will provide for indemnification obligations principally designed to place financial responsibility for the obligations and liabilities of our business with us and financial responsibility for the obligations and liabilities of Parent's remaining business with Parent, among other indemnities. If we are required to indemnify Parent under the circumstances set forth in the separation and distribution agreement, we may be subject to substantial liabilities.

        In addition, the separation and distribution agreement that Parent entered into with Covidien Plc ("Covidien"), which was subsequently acquired by Medtronic plc, in connection with the separation of Parent from Covidien in June 2013 provided for indemnification obligations. This separation and distribution agreement was filed with the SEC by Parent as Exhibit 2.1 to its Current Report on Form 8-K on July 1, 2013. Under our separation and distribution agreement with Parent, we will indemnify Parent and Covidien, to the extent Parent is liable to Covidien under its separation and distribution agreement with Covidien, in respect of obligations and liabilities associated with the Mallinckrodt Inc. Business. These potential indemnification obligations could have a material adverse

40


effect on our business, financial condition, results of operations and cash flows. For additional discussion, see "Our Relationship with Parent Following the Distribution."

After the separation, certain of our executive officers and other key employees may have actual or potential conflicts of interest because of their current or previous positions at Parent.

        The ownership by our expected executive officers and other key employees of Parent ordinary shares or equity awards in respect of Parent ordinary shares may create, or may create the appearance of, conflicts of interest. Because of their current positions with Parent, certain of these expected executive officers and other key employees own Parent ordinary shares and/or Parent equity awards, which may comprise a significant portion of some of these individuals' total personal financial assets. Following the separation, even though our expected executive officers and other key employees who are currently employees of Parent will cease to be employees of Parent, some of our executive officers and other key employees may continue to have a financial interest in Parent ordinary shares, which may create, or may create the appearance of, conflicts of interest when these individuals are faced with decisions that could have different implications for Parent than the decisions have for Mallinckrodt Inc.

We may not achieve some or all of the expected benefits of the separation, and the separation may materially adversely affect our business.

        We may not be able to achieve the full strategic and financial benefits expected to result from the separation, or such benefits may be delayed or not occur at all. The separation is expected to provide the following benefits, among others: (i) the ability of each of Parent and Mallinckrodt Inc. to focus on its own strategic and operational plans and capital structure; (ii) focused research and development and operations with an optimal level of investment in research and development projects for each business and operating strategy; (iii) an appropriate capital structure for each of Parent and Mallinckrodt Inc.; (iv) an independent equity structure that will provide Mallinckrodt Inc. direct access to the capital markets; (v) more effective equity-based compensation and currency for acquisitions; and (vi) a distinct investment identity allowing investors to evaluate the merits, performance and future prospects of Mallinckrodt Inc. separately from Parent. We may not achieve these and other anticipated benefits for a variety of reasons, including, among others: (a) the separation will require significant amounts of management's time and effort, which may divert management's attention from operating and growing our business; (b) following the separation, Mallinckrodt Inc. may be more susceptible to market fluctuations and other adverse events than if it were still a part of Parent; (c) following the separation, our business will be less diversified than Parent's business prior to completion of the separation; and (d) the actions required to separate Parent's and Mallinckrodt Inc.'s respective businesses could disrupt our operations. If we fail to achieve some or all of the benefits expected to result from the separation, or if such benefits are delayed, it could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

No vote of Parent's shareholders is required to complete the separation and the distribution. As a result, if you do not want to receive shares of our common stock in the distribution upon its completion, your sole recourse will be to divest yourself of your Parent ordinary shares prior to the record date.

        No vote of the Parent shareholders is required in connection with the separation or the distribution. Accordingly, if you do not want to receive shares of our common stock in the distribution upon its completion, your only recourse will be to divest yourself of your Parent ordinary shares prior to the record date for the distribution.

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If the distribution, together with certain related transactions, fails to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, Mallinckrodt Inc., Parent and Parent's shareholders could be subject to significant tax liability or tax indemnity obligations.

        Parent expects to receive an opinion from Wachtell, Lipton, Rosen & Katz to the effect that the distribution, together with certain related transactions, should qualify as a "reorganization" within the meaning of Sections 355 and 368(a)(1)(D) of the Code. This opinion will be based upon and rely on, among other things, various facts and assumptions, as well as certain representations, statements and undertakings of Parent and us, including those relating to the past and future conduct of Parent and us. If any of these representations, statements or undertakings is, or becomes, inaccurate or incomplete, or if any representations or covenants contained in any of the separation-related agreements and documents or in any documents relating to the opinion of counsel are breached, such opinion may be invalid and the conclusions reached therein could be jeopardized.

        Notwithstanding the receipt of the opinion of counsel, the Internal Revenue Service (the "IRS") could determine that the distribution and/or certain related transactions should be treated as a taxable transaction if it determines that any of the facts, assumptions, representations, statements or undertakings upon which the opinion of counsel was based is incorrect or has been violated, or that the distribution should be taxable for other reasons, including as a result of certain transactions occurring after the distribution. In addition, the opinion of counsel will represent the judgment of such counsel and will not be binding on the IRS or any court and the IRS or a court may disagree with the conclusions in such opinion. Parent has not sought and does not intend to seek a ruling from the IRS with respect to the treatment of the distribution and certain related transactions for U.S. federal income tax purposes. Accordingly, notwithstanding the receipt of an opinion of counsel, there can be no assurance that the IRS will not assert that the distribution and/or certain related transactions do not qualify for tax-free treatment for U.S. federal income tax purposes or that a court would not sustain such a challenge.

        If the distribution, together with certain related transactions, fails to qualify as a transaction that is generally tax-free, for U.S. federal income tax purposes, under Sections 355 and 368(a)(1)(D) of the Code, the distribution to you would be treated as a taxable distribution in an amount equal to the fair market value of the Mallinckrodt Inc. stock received by you, which would be treated as a taxable dividend to you for U.S. federal income tax purposes to the extent of your pro rata share of Parent's current and accumulated earnings and profits (as determined for U.S. federal income tax purposes), then as a non-taxable return of capital to the extent of your basis in Parent ordinary shares, and finally as capital gain from the sale or exchange of Parent ordinary shares, and you could incur significant U.S. federal income tax liability. In addition, Parent and/or we could incur additional U.S. federal income tax liabilities or tax indemnification obligations. For more information, see "Material U.S. Federal Income Tax Consequences."

        Under the tax matters agreement that Parent will execute with us, we may be required to indemnify Parent against any additional taxes and related costs, damages or other amounts resulting from (i) repurchases of shares of our stock other than in certain open-market transactions, (ii) our cessation of the active conduct of certain of our businesses, (iii) certain post-distribution restructuring or other transactions entered into by us, (iv) other actions or failures to act by us or (v) any of our representations, covenants or undertakings contained in any of the separation-related agreements and documents or in any documents relating to the opinion of counsel being incorrect or violated. Any such indemnity obligations could be material. For further discussion, see "Our Relationship with Parent Following the Distribution—Tax Matters Agreement."

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We may not be able to engage in desirable transactions following the distribution.

        Under current U.S. federal income tax law, the distribution and certain related transactions could be rendered taxable for U.S. federal income tax purposes as a result of certain post-distribution acquisitions of our shares or assets (or of shares or assets of Parent). As a result, to preserve the tax-free nature of the distribution we (and/or Parent) may determine to forgo certain transactions that would otherwise be advantageous, including share repurchases, certain asset dispositions and other strategic transactions, for some period of time following the distribution. Moreover, in addition to our indemnity obligations described above, the tax matters agreement will restrict us, for the 25-month period following the distribution, except in specific circumstances, from, among other things: (i) repurchasing shares of our stock other than in certain open-market transactions, (ii) ceasing to actively conduct certain of our businesses, (iii) entering into certain restructuring or other transactions, or (iv) taking or failing to take certain other actions that could cause the distribution and certain related transactions to not qualify as a transaction that is generally tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code. These restrictions may limit our ability to pursue certain transactions that we otherwise believe to be in the best interest of our shareholders or that may maximize the value of our business. However, the tax matters agreement will not prevent us from taking all actions that could cause the distribution and certain related transaction to be taxable to Parent or Parent shareholders. For more information, see "Our Relationship with Parent Following the Distribution—Tax Matters Agreement."

Risks Related to Our Common Stock

We cannot be certain that an active trading market for shares of our common stock will develop or be sustained after the distribution, and following the distribution, our stock price may fluctuate significantly.

        A public market for shares of our common stock does not currently exist. We anticipate that on or prior to the record date for the distribution, trading of shares of our common stock will begin on a "when-issued" basis and will continue through the distribution date. However, we cannot guarantee that an active trading market will develop or be sustained for shares of our common stock after the distribution. We also cannot predict the effect of the distribution on the trading prices of shares of our common stock or whether the combined market value of shares of our common stock and Parent's ordinary shares will be less than, equal to or greater than the market value of Parent's ordinary shares prior to the distribution.

        The market price of shares of our common stock may fluctuate significantly due to a number of factors, some of which may be beyond our control, including:

    actual or anticipated fluctuations in our results of operations;

    changes in earnings estimated by securities analysts or our ability to meet those estimates;

    the operating and stock price performance of comparable companies;

    changes to the regulatory and legal environment in which we operate; and

    U.S. and worldwide economic conditions.

        In addition, when the market price of a company's shares of common stock drops significantly, shareholders often institute securities class action lawsuits against the company. A lawsuit against us could cause us to incur substantial costs and could divert the time and attention of our management and other resources.

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A number of shares of our common stock are or will be eligible for future sale, which may cause our stock price to decline.

        Any sales of substantial amounts of shares of our common stock in the public market or the perception that such sales might occur, in connection with the distribution or otherwise, may cause the market price of shares of our common stock to decline. Upon completion of the distribution, we expect that we will have an aggregate of approximately [            ] shares of our common stock issued and outstanding. These shares will be tradable without restriction or further registration under the U.S. Securities Act of 1933, as amended (the "Securities Act"), unless the shares are owned by one of our "affiliates," as that term is defined in Rule 405 under the Securities Act.

        We are unable to predict whether large amounts of shares of our common stock will be sold in the open market following the distribution. We are also unable to predict whether a sufficient number of buyers would be in the market at that time.

If securities or industry analysts do not publish research or publish misleading or unfavorable research about our business, our stock price and trading volume could decline.

        The trading market for Mallinckrodt Inc. common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage for Mallinckrodt Inc. common stock. If there is no research coverage of our common stock, the trading price for shares of our common stock may be negatively impacted. If we obtain research coverage for our common stock and if one or more of the analysts downgrades our stock or publishes misleading or unfavorable research about our business, our stock price may decline. If one or more of the analysts ceases coverage of our common stock or fails to publish reports on us regularly, demand for our common stock could decrease, which could cause our common stock price or trading volume to decline.

There may be substantial changes in our shareholder base following the distribution.

        Many investors receiving shares of Mallinckrodt Inc. common stock pursuant to the distribution may hold those shares because of a decision to invest in a company with Parent's profile. Following the distribution, the shares of Mallinckrodt Inc. common stock held by those investors will represent an investment in a smaller company with a different focus and investment profile. This may not be aligned with a holder's investment strategy and may cause the holder to sell the shares of our common stock they receive in the distribution. As a result, our stock price may decline or experience volatility as our shareholder base changes.

We do not expect to pay any cash dividends for the foreseeable future.

        We currently intend to retain future earnings to finance the operation and expansion of our business. As a result, we do not expect to pay any cash dividend for the foreseeable future. All decisions regarding the payment of dividends will be made by our board of directors from time to time in accordance with applicable law. There can be no assurance that we will have sufficient surplus under Delaware law to be able to pay any dividends at any time in the future. This may result from extraordinary cash expenses, actual expenses exceeding contemplated costs, funding of capital expenditures or increases in reserves. If we do not pay dividends, the price of the shares of Mallinckrodt Inc. common stock that you receive in the distribution must appreciate for you to receive a gain on your investment. This appreciation may not occur. Further, you may have to sell some or all of your shares of Mallinckrodt Inc. common stock to generate cash flow from your investment.

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Your percentage of ownership in Mallinckrodt Inc. may be diluted in the future.

        In the future, your percentage ownership in us may be diluted because of equity awards that we will be granting to our directors, officers and employees or otherwise as a result of equity issuances for acquisitions or capital market transactions. Further, we anticipate that the compensation committee of our board of directors will grant additional share-based awards to our employees after the distribution. Such awards will have a dilutive effect on earnings per share, which could adversely affect the market price of shares of Mallinckrodt Inc. common stock. From time to time, we will issue additional share-based awards to our employees under our employee benefits plans.

        In addition, our amended and restated certificate of incorporation will authorize us to issue, without the approval of our shareholders, one or more classes or series of preferred stock that have such designation, powers, preferences and relative, participating, optional and other special rights, including preferences over Mallinckrodt Inc. common stock respecting dividends and distributions, as our board of directors generally may determine. The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the value of Mallinckrodt Inc. common stock. Similarly, the repurchase or redemption rights or liquidation preferences we could assign to holders of preferred stock could affect the residual value of the common stock. See "Description of Our Capital Stock."

Provisions in our amended and restated certificate of incorporation and bylaws and of applicable law may prevent or delay a potential acquisition of Mallinckrodt Inc., which could decrease the trading price of our common stock.

        Our amended and restated certificate of incorporation and bylaws that will be in effect from and after the completion of the separation, as well as Delaware law, contain provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids more expensive to the acquiror and to encourage prospective acquirors to negotiate with our board of directors rather than to attempt a hostile takeover. These provisions include, among others:

    the inability of Mallinckrodt Inc.'s shareholders to call a special meeting or act by written consent with less than the unanimous written consent of all of our shareholders;

    rules regarding how shareholders may present proposals or nominate directors for election at shareholder meetings;

    the right of Mallinckrodt Inc.'s board of directors to issue preferred stock without shareholder approval;

    the division of Mallinckrodt Inc.'s board of directors into three approximately equal classes of directors until the third annual meeting of shareholders following the separation, after which directors will be elected annually (as further described under "Description of Our Capital Stock—Corporate Governance—Director Elections");

    the inability of Mallinckrodt's shareholders to remove any of our directors—other than for cause—for so long as our board of directors is classified;

    the ability of our directors, but not our shareholders, to fill vacancies on our board of directors (including those resulting from removal of directors or an enlargement of the board of directors);

    the ability of our board of directors to adopt, amend, alter or repeal provisions of our amended and restated bylaws; and

    a requirement that amendments by our shareholders to certain provisions of our amended and restated certificate of incorporation or bylaws may only be made with the approval of the

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      holders of at least 75% of the outstanding shares of our common stock, unless such amendment has been approved by at least two-thirds of the members of our board of directors, in which case (unless otherwise expressly provided in our amended and restated certificate of incorporation or bylaws, as applicable) our amended and restated certificate of incorporation or bylaws, as applicable, may be amended and any provision repealed by such shareholder approval as may be specified by law.

        Delaware law also imposes some restrictions on mergers and other business combinations between any holder of 15% or more of the shares of our outstanding common stock and us. For more information, see "Description of Our Capital Stock—Potential Anti-Takeover Effects of Various Provisions of Delaware Law and Our Amended and Restated Certificate of Incorporation and Bylaws."

        We believe these provisions protect our shareholders from coercive or otherwise unfair takeover tactics by requiring potential acquirors to negotiate with our board of directors and by providing our board of directors with more time to assess any acquisition proposal. These provisions are not intended to make us immune from takeovers. However, these provisions apply even if the offer may be considered beneficial by some shareholders and could delay or prevent an acquisition that our board of directors determines is not in the best interests of our company and our shareholders. Accordingly, in the event that our board of directors determines that a potential business combination transaction is not in the best interests of our company and our shareholders but certain shareholders believe that such a transaction would be beneficial to us and our shareholders, such shareholders may elect to sell their shares in our company and the trading price of Mallinckrodt Inc. common stock could decrease.

        These and other provisions of our amended and restated certificate of incorporation, amended and restated bylaws and the Delaware General Corporation Law, as amended (the "DGCL"), could have the effect of delaying, deferring or preventing a proxy contest, tender offer, merger or other change in control, which may have a material adverse effect on our business, financial condition and results of operations.

Our amended and restated certificate of incorporation will designate the state courts of the State of Delaware, or, if no state court located in the State of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders, which could discourage lawsuits against us and our directors and officers.

        Our amended and restated certificate of incorporation will provide that, unless our board of directors otherwise determines, the state courts of the State of Delaware, or, if no state court located in the state of Delaware has jurisdiction (including with respect to any actions arising under the Exchange Act for which the federal courts have exclusive jurisdiction), the federal court for the District of Delaware, will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of our company, any action asserting a claim of breach of a fiduciary duty owed by any director or officer to our company or our shareholders, creditors or other constituents, any action asserting a claim against us or any director or officer arising pursuant to any provision of the DGCL, or our amended and restated certificate of incorporation or bylaws, or any action asserting a claim against us or any director or officer governed by the internal affairs doctrine. This exclusive forum provision may limit the ability of our shareholders to bring a claim in a judicial forum that such shareholders find favorable for disputes with our company or our directors or officers, which may discourage such lawsuits against us and our directors and officers. Alternatively, if a court outside of Delaware were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations.

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We are an "emerging growth company" and, as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, our common stock may be less attractive to investors for so long as we remain an emerging growth company.

        We are an "emerging growth company," as defined in the JOBS Act, and we intend to take advantage of some of the exemptions from reporting requirements that are afforded to emerging growth companies, including, but not limited to, exemption from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we intend to rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be lower or more volatile as a result. We may take advantage of these exemptions until we no longer qualify as an emerging growth company.

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

        This information statement and other materials Parent and Mallinckrodt Inc. have filed or will file with the SEC contain, or will contain, certain forward-looking statements regarding business strategies, market potential, future financial performance and other matters. The words "believe," "expect," "anticipate," "project" and similar expressions, among others, generally identify "forward-looking statements," which speak only as of the date the statements were made. The matters discussed in these forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those projected, anticipated or implied in the forward-looking statements. In particular, information included under "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business," and "The Separation" contain forward-looking statements. Where, in any forward-looking statement, an expectation or belief as to future results or events is expressed, such expectation or belief is based on the current plans and expectations of Mallinckrodt Inc. management and expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. Factors that could cause actual results or events to differ materially from those anticipated include the matters described under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

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DIVIDEND POLICY

        We currently intend to retain any earnings to finance R&D, acquisitions and the operation and expansion of our business and do not anticipate paying any cash dividends for the foreseeable future. The recommendation, declaration and payment of any dividends in the future by us will be subject to the sole discretion of our board of directors and will depend upon many factors, including our financial condition, earnings, capital requirements of our operating subsidiaries, covenants associated with certain of our debt obligations, legal requirements, regulatory constraints and other factors deemed relevant by our board of directors. Moreover, if we determine to pay any dividends in the future, there can be no assurance that we will continue to pay such dividends.

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CAPITALIZATION

        The following table sets forth our capitalization as of March 29, 2019 on a historical basis and on a pro forma basis to give effect to the pro forma adjustments included in our unaudited pro forma financial information. The historical information below does not necessarily reflect what our capitalization would have been had we operated as a separate, publicly traded company for the period presented and is not necessarily indicative of our future capitalization. This table should be read in conjunction with our unaudited pro forma condensed combined financial statements and accompanying notes, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and our combined financial statements and accompanying notes included elsewhere in this information statement.

 
  March 29, 2019  
(Dollars in Millions)
  Actual   Pro Forma  

Cash and cash equivalents

             

Liabilities:

             

Current maturities of long-term debt

  $   $               

Long-term debt

                      

Total debt

                      

Equity:

             

Common stock (par value $0.01 per share)

                      

Additional paid-in capital

                      

Parent company investment

    954.8                   

Accumulated other comprehensive income/loss

    7.8                   

Equity attributable to the Company

    962.6                   

Non-controlling interests

                      

Total Equity

    962.6                   

Total Capitalization

  $ 962.6   $               

        We have not yet finalized our post-distribution capitalization; however, we currently expect to enter into a [          ]-year asset-backed revolving credit facility allowing borrowings of up to $[            ] million in the aggregate in connection with the separation. We also expect to have approximately $[            ] million of cash on hand at the time of the distribution. Pro forma financial information reflecting our post-distribution capitalization will be included in an amendment to this information statement.

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

        The following unaudited pro forma condensed combined financial statements have been derived from the historical combined financial statements of the Mallinckrodt Inc. Business of Parent included elsewhere in this information statement. The unaudited pro forma condensed combined statement of income assumes that the separation from Parent occurred on December 30, 2017, the first day of fiscal 2018. The unaudited pro forma condensed combined balance sheet assumes that the separation from Parent occurred on March 29, 2019. These financial statements have been adjusted to reflect the following:

    the transfer by Parent to us of various corporate assets and liabilities historically managed by Parent and its subsidiaries that are not included in our historical combined balance sheet and the transfer of certain of our assets and liabilities which will be retained by Parent;

    the distribution of shares of our common stock to Parent's shareholders and the elimination of historical parent company investment; and

    our anticipated capital structure, including debt anticipated to be incurred.

        The assumptions used and pro forma adjustments derived from such assumptions are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma condensed combined financial statements. The assumptions used and pro forma adjustments derived from such assumptions are based on currently available information. Management believes such assumptions are reasonable.

        The following unaudited pro forma condensed combined financial statements should also be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our combined financial statements and accompanying notes included elsewhere in this information statement. The unaudited pro forma condensed combined financial statements are presented for informational purposes only. The unaudited pro forma condensed combined financial statements are not necessarily indicative of our results of operations or financial condition had the distribution and related transactions been completed on the dates assumed. Also, they may not reflect the results of operations or financial condition that would have been obtained if we had operated as a separate, publicly traded company during such periods. In addition, they are not necessarily indicative of our future results of operations or financial condition.

        During the three months ended March 29, 2019 and fiscal 2018, Parent allocated general corporate expenses in the amount of $8.6 million and $33.0 million, respectively. General corporate expenses include, but are not limited to, costs related to finance, legal, information technology, human resources, communications, employee benefits and incentives, insurance and share-based compensation, which are included in our historical results. As a standalone public company, these operating costs are estimated to be approximately $10.0 million to $20.0 million higher annually than the general corporate expenses historically allocated from Parent. No pro forma adjustments have been made to our unaudited pro forma condensed combined financial statements to reflect the additional costs and expenses described in this paragraph because they are projected amounts based on judgmental estimates.

        We currently estimate expenses that we will incur during our transition to being a standalone public company to range from approximately $[            ] million to $[            ] million. We expect to incur substantially all of these expenses within 18 months of the separation. These expenses are anticipated to primarily relate to (i) costs to separate information systems and (ii) accounting, tax, legal and other professional costs associated with our separation and establishment as a standalone public company. We have not adjusted the unaudited pro forma condensed combined financial statements for these estimated expenses as they are projected amounts based on judgmental estimates and are not expected to have an ongoing impact on our operating results.

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THE MALLINCKRODT INC. BUSINESS OF PARENT
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
Three Months Ended March 29, 2019
(in millions, except per share data)

 
  Historical   Pro Forma
Adjustments
   
  Pro Forma    

Net sales

  $ 186.4   $         $      

Cost of sales

    117.6                    

Gross profit

    68.8                    

Selling, general and administrative expenses

    53.4                    

Research and development expenses

    9.0                    

Separation costs

    7.7         (a)          

Operating loss

    (1.3 )                  

Other income, net

    7.3         (b)          

Interest expense

            (c)          

Income before income taxes

    6.0                    

Provision for income taxes

    3.3         (b)(d)          

Net income

  $ 2.7   $         $      

Pro forma earnings per share:

                         

Basic

                        (e)

Diluted

                        (f)

Pro forma weighted-average shares outstanding:

                         

Basic

                        (e)

Diluted

                        (f)

52



THE MALLINCKRODT INC. BUSINESS OF PARENT
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (Continued)
Fiscal Year Ended December 28, 2018
(in millions, except per share data)

 
  Historical   Pro Forma
Adjustments
   
  Pro Forma    

Net sales

  $ 718.9   $                    $                 

Cost of sales

    476.6                                          

Gross profit

    242.3                                          

Selling, general and administrative expenses

    164.3                                          

Research and development expenses

    54.3                                          

Separation costs

    4.8                    (a)                     

Impairment charge

    2.0                                          

Operating income

    16.9                                          

Other income, net

    35.1                    (b)                     

Interest expense

                       (c)                     

Income before income taxes

    52.0                                          

Provision for income taxes

    9.6                    (b)(d)                     

Net income

  $ 42.4   $                    $                 

Pro forma earnings per share:

                         

Basic

                                                         (e)

Diluted

                                                         (f)

Pro forma weighted-average shares outstanding:

                         

Basic

                                                         (e)

Diluted

                                                         (f)

See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.

53



THE MALLINCKRODT INC. BUSINESS OF PARENT
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
At March 29, 2019
(in millions, except per share data)

 
  Historical   Pro Forma
Adjustments
   
  Pro Forma  

Assets

                       

Current Assets:

                       

Cash and cash equivalents

  $ 6.5   $                (g)   $               

Accounts receivable trade, less allowance for doubtful accounts

    212.7                                        

Inventories

    225.2                                        

Prepaid expenses and other current assets

    37.2                                        

Total current assets

    481.6                                        

Property, plant and equipment, net

    598.6                    (h)                   

Intangible assets, net

    132.9                                        

Other assets

    174.1                                        

Total Assets

  $ 1,387.2   $                    $               

Liabilities and Shareholders' Equity

                       

Current Liabilities:

                       

Accounts payable

  $ 41.8   $                    $               

Accrued payroll and payroll-related costs

    16.3                    (h)                   

Product related accruals

    37.8                                        

Other current liabilities

    99.8                    (i)                   

Total current liabilities

    195.7                                        

Long-term debt

                       (g)                   

Pension and postretirement benefits

    58.0                    (j)                   

Environmental liabilities

    59.6                                        

Deferred income taxes

    3.5                    (k)                   

Other liabilities

    107.8                                        

Total Liabilities

    424.6                                        

Shareholders' Equity:

                       

Common stock, $0.01 par value, [            ] authorized; [            ] issued and outstanding on a pro forma basis

                                    (l)                   

Additional paid-in capital

                                    (l)                   

Parent company investment

    954.8                    (m)                   

Accumulated other comprehensive income

    7.8                                        

Total Shareholders' Equity

    962.6                                        

Total Liabilities and Shareholders' Equity

  $ 1,387.2   $                    $               

See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.

54



THE MALLINCKRODT INC. BUSINESS OF PARENT
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

a)
Reflects the removal of separation costs directly related to the separation that were incurred during the historical period. These costs were primarily for accounting, tax, legal and other professional fees.

b)
Represents the reclassification of income tax expense associated with unrecognized tax benefit ("UTB") liabilities to other expense as a result of certain UTB liabilities becoming an obligation to Parent (as an indemnity upon separation) as opposed to being payable to the respective taxing authority. As the associated liabilities are reported within other long-term liabilities before and after separation, a pro forma adjustment to the condensed combined balance sheet is not required as a result of this reclassification.

c)
Reflects estimated interest expense and amortization of debt issuance costs in connection with debt we expect to issue prior to or at the time of separation. The pro forma impact was based on the incurrence of $[            ] million of debt with an assumed weighted-average interest rate of [      ]%, and an assumed weighted average life of approximately [            ] years.

d)
Reflects the tax effects of the pro forma adjustments at the applicable statutory income tax rates. Also represents a $[            ] million decrease in income tax expense due to changes in the internal capital structure resulting from the internal reorganization of our legal entities to facilitate the separation.

e)
Pro forma basic earnings per share and pro forma weighted-average basic shares outstanding reflect the estimated number of shares of common stock we expect to have outstanding upon completion of the distribution based on the number of Parent ordinary shares outstanding on the dates of the respective unaudited pro forma condensed combined statements of income, adjusted for an assumed distribution ratio of one share of Mallinckrodt Inc. common stock for every [            ] Parent ordinary shares.

f)
Pro forma diluted earnings per share and pro forma weighted-average diluted shares outstanding reflect the estimated number of shares of common stock we expect to have outstanding upon completion of the distribution and reflect the potential issuance of ordinary shares under Parent equity plans in which our employees participate based on the distribution ratio. While the actual dilutive impact in the future may differ from these estimates, we believe this estimate yields a reasonable approximation of the dilutive impact of Parent equity plans.

g)
Reflects the issuance of $[            ] million of debt, net of issuance costs and the retention by Parent of $[            ] million of cash proceeds thereof.

h)
Represents the transfer of certain of our property, plant and equipment which will be retained by Parent, net of certain property, plant and equipment which Parent will transfer to us. Depreciation and other expenses associated with these assets are expected to be comparable to the amounts recorded in our historical combined financial statements for this period.

i)
Represents the transfer of certain corporate liabilities historically managed by Parent which will transfer to us.

j)
Represents the transfer of certain pension liabilities from Parent to us.

k)
Represents an adjustment to net deferred tax liabilities as a result of the internal reorganization of our legal entities to facilitate the separation.

l)
Represents an adjustment to reflect the pro forma recapitalization of our equity. As of the distribution date, Parent's net investment in Mallinckrodt Inc. will be eliminated to reflect the distribution of our common stock to Parent's shareholders. Parent's shareholders will receive one

55


    share of Mallinckrodt Inc. common stock for every [            ] ordinary share of Parent owned as of the record date of the distribution.

m)
Represents (h) the net offset $[            ] to all of the pro forma adjustments to the assets and liabilities in our unaudited pro forma condensed combined balance sheet and (ii) the reclassification of the remaining balance within Parent company investment $[            ] in order to reflect the pro forma recapitalization of our equity (see Note (l) above for additional details).

56



SELECTED HISTORICAL COMBINED FINANCIAL DATA

        The following table sets forth selected financial data for the Mallinckrodt Inc. Business of Parent. The combined statement of income data for the three months ended March 29, 2019 and March 30, 2018 and the combined balance sheet data as of March 29, 2019 have been derived from our unaudited condensed combined financial statements included elsewhere in this information statement. The combined statement of income data for fiscal 2018, fiscal 2017, fiscal 2016 and three months ended December 30, 2016, and the combined balance sheet data as of December 28, 2018 and December 29, 2017 are derived from our audited combined financial statements and accompanying notes included elsewhere in this information statement. The summary balance sheet data as of December 30, 2016 is derived from our audited combined financial statements that are not included in this information statement. The summary balance sheet data as of March 30, 2018 and September 30, 2016 is derived from our unaudited combined financial statements that are not included in this information statement. The unaudited condensed combined financial statements have been prepared on the same basis as the audited combined financial statements and, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the information set forth herein.

        The selected historical combined financial data presented below should be read in conjunction with our combined financial statements and accompanying notes, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our unaudited pro forma condensed combined financial statements and accompanying notes included elsewhere in this information statement. Our historical financial data may not be indicative of the results of operations or financial condition that would have been obtained if we had operated as a separate, publicly traded company during the periods presented or of our future performance as an independent company.

 
  Three Months
Ended
  Fiscal Year Ended   Three Months
Ended
 
(dollars in millions)
  March 29,
2019
  March 30,
2018
  December 28,
2018
  December 29,
2017
  September 30,
2016
  December 30,
2016
 

Combined Statement of Income Data:

                                     

Data:

                                     

Net sales

  $ 186.4   $ 182.7   $ 718.9   $ 869.6   $ 1,092.0   $ 229.8  

Gross profit

    68.8     68.7     242.3     366.2     611.3     112.2  

Operating (loss) income

    (1.3 )   16.2     16.9     174.1     334.8     (166.3 )

Income (loss) before income taxes

    6.0     19.5     52.0     99.1     323.7     (212.4 )

Net income (loss)

    2.7     13.2     42.4     82.5     218.2     (209.3 )

Combined Balance Sheet Data (End of Period):

                                     

Total assets

  $ 1,387.2   $ 1,333.3   $ 1,398.5   $ 1,333.9   $ 1,608.3   $ 1,362.6  

Parent company equity

    962.6     934.5     971.8     915.9     1,102.7     881.8  

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BUSINESS

Overview

        We are a company focused on providing our customers high-quality complex generic pharmaceutical products and active pharmaceutical ingredients ("API(s)"). Our commercial, research and development, corporate operations and back office functions are located in Saint Louis, Missouri, United States. We use our specialized characterization, development, formulation, and synthetic and analytical chemistry expertise to develop and manufacture a range of complex generic pharmaceutical products and APIs. Our products include: immediate and extended-release tablets and capsules; oral solutions; immediate and extended-release oral suspensions; dispersible tablets; orally disintegrating tablets; transdermal patches; and intramuscular, subcutaneous and intravenous injectable products. We utilize our APIs in the production of our finished dose drugs, and also for internal drug product development.

        We sell our complex generic pharmaceutical products primarily to distributors, who subsequently sell our products to retail pharmacy chains, independent pharmacies, government entities, hospitals, hospice providers and long-term care providers. Those entities then dispense our complex generic products to patients. We sell and distribute APIs to pharmaceutical companies, contract manufacturers and other associated industrial customers; however, our API products are primarily sold directly to global pharmaceutical manufacturers. We also manufacture products for third parties under contract.

History and Development

        We can trace our history to the founding of G. Mallinckrodt & Co. in 1867, the predecessor of today's API business. We believe our core values of quality, integrity and service have set us apart from our competitors over our greater than 150-year history in this business. In the mid-1990s, we expanded our controlled substance API business into complex generics and became one of the largest U.S. generic dosage pharmaceuticals businesses in 2018 as compared to our competitors with similar product portfolios.

        Mallinckrodt Inc. was incorporated as a Delaware corporation on January 18, 2019 for the purpose of holding the Mallinckrodt Inc. Business following the separation. Prior to the transfer by Parent to us of the Mallinckrodt Inc. Business, we will have no operations other than those incidental to our formation and in preparation for the separation.

Our Competitive Strengths

        We believe we have the following strengths:

    Distinct vertically integrated manufacturing and distribution skills with a reputation for quality.  Our manufacturing and supply chain capabilities enable highly efficient controlled substance tableting, packaging and distribution. We have one of the world's largest DEA Schedule II vaults for the storage of raw materials, intermediates and finished goods. Whenever possible, we leverage our vertically integrated assets and capabilities to reduce costs and deliver high-quality products and services. We have received numerous awards from our customers for our reliability of supply and product quality.

    Increasingly diverse pipeline of complex generic product candidates that leverage our specialized characterization, deformulation and formulation development capabilities. We have technical capabilities that support the advancement of our complex generics pipeline. These capabilities enable us to develop technically challenging products in a broad range of dosage forms, including tablets, capsules, oral liquids, solutions and complex injectables. Our advanced characterization capability enables us to utilize characterization in lieu of clinical trials for bioequivalence for a select number of products.

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    Industry-leading controlled substance portfolio of complex generic pharmaceutical products and APIs for pain management. We have a strong position in the controlled substance generics market. Our industry-leading controlled substance portfolio allows us to serve the most complex needs of our customers. We believe we offer the broadest product line of opioid and other controlled substances (primarily DEA Schedule II and III), giving us a leading position in the controlled substance generics market. In an industry characterized by strict regulatory and technical demands, we believe our comprehensive portfolio allows us to efficiently tailor our offerings to meet the needs of customer, legal and regulatory stakeholders.

    Track record of expertise in the acquisition, importation and handling of government-regulated raw materials. We have a proven track record of expertise in the acquisition, importation and handling of highly regulated narcotic raw materials. We operate our business under rigorous quality standards and emphasize delivering quality with efficiency across our manufacturing operations. The acquisition of certain raw materials and the processing of those materials into finished products require a close collaboration with a wide variety of state and federal regulatory authorities, including the FDA and DEA. We have a long history of dealing with these regulatory agencies, including addressing concerns and issues raised by authorities in connection with our operations, and managing the related complexity to provide ongoing, reliable access to these highly controlled products. In July 2017, we entered into a final settlement with the DEA and certain other governmental authorities to settle investigations relating to our suspicious order monitoring program for controlled substances and our record-keeping and security practices at our Hobart facility, as discussed in more detail under "—Legal Proceedings." We have a unique combination of physical assets, long-term contractual agreements with suppliers, relationships with regulatory agencies and longevity in the market, which we believe delivers value to our customers and shareholders which our competitors find difficult to match.

    Diversified revenue and product profile with demonstrated operational excellence.  We have a diversified revenue base across APIs, contract manufacturing and finished dosage form generics with solid cash flows and a long-standing leadership position in controlled substances. In 2018, our diverse portfolio of products generated $718.9 million of total revenue.

    Experienced management team with dedicated employees.  Our executive management team is a diverse set of industry veterans, with more than 100 years of experience with our company, and more than 160 years in the life sciences industry. We benefit from having a management team with extensive experience in small, medium and large life sciences firms. Matthew Harbaugh, who will serve as our President and Chief Executive Officer, has more than 20 years of experience in life sciences and has been in senior management with Parent for over 10 years. We are proud of our dedicated work force with an average employee tenure of 12 years. We embrace a culture of quality, integrity and service and seek to create an environment where our employees are empowered to drive outcomes.

        While we have set forth our competitive strengths above, our business involves numerous risks and uncertainties which may prevent us from executing our strategies. For a complete description of the risks associated with our business, see "Risk Factors."

Our Businesses and Products

        Information with respect to our single operating segment is included below and in Note 20 to our audited combined financial statements included elsewhere in this information statement.

        Our business is managed as a single segment consisting of complex generic pharmaceuticals and APIs. The single segment determination aligns with how the financial information is viewed by the Chief Executive Officer (our chief operating decision maker) for the purposes of making resource allocation decisions and assessing the performance of the business.

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Complex Generics and APIs

        We produce a broad offering of over 20 generic product families, most of which are U.S. Drug Enforcement Administration ("DEA") controlled substances, across three manufacturing facilities in the U.S. and our contract manufacturing network. Our facilities are highly regulated by the U.S. Food and Drug Administration ("FDA"), DEA and other agencies. We are one of the largest generic controlled substance pharmaceutical businesses in the U.S. Our key products include hydrocodone-containing tablets, oxycodone-containing tablets and other controlled substances, all of which are significant products for the treatment of pain. Our other controlled substance products include products for the treatment of ADHD and addiction disorders. Historically, our primary competition has been other U.S.-based participants due to importation restrictions on controlled substance API and drug products. In recent years, our competitors have increasingly become companies based outside the U.S. that have acquired or built facilities in the U.S. in order to compete in the U.S. market.

        We produce approximately 40 API products across three manufacturing sites for use in our own complex generic pharmaceutical products and for sale to third parties—many of whom are competitors with our complex generic pharmaceuticals business—for use in branded and generic products in a variety of therapeutic areas. Our API business manufactures high-quality products that meet our customers' unique specifications and provides comprehensive technical services to our customers. We are among the world's largest manufacturers of acetaminophen and are the only producer in the North American and European regions. We also manufacture controlled substance APIs and are one of the leading U.S. producers of opioid and stimulant molecules for use in pharmaceuticals which treat pain, addiction and ADHD. We manufacture these controlled substances under DEA quota restrictions, and we estimate that we received approximately 38% of the 2018 total annual production DEA quota for the controlled substances we manufacture.

        Our key products include:

    Hydrocodone API and hydrocodone-containing tablets in a variety of strengths;

    Oxycodone API and oxycodone-containing tablets in a variety of strengths;

    Acetaminophen API in bulk powder and directly compressible forms;

    Other controlled substances (including API and generic products); and

    Other products (including contract manufacturing).

Industry Overview and Trends

        We participate in the global pharmaceutical market through the development, manufacturing, sale and distribution of small molecule APIs and finished generic drugs. Recent trends in new drug development have focused on large molecule biologic drugs, but the vast majority of API volume globally is still in small molecules. The U.S. generic market in general is growing overall in volume, but has been declining in value over the past several years. Over the long term, prices for generics in the U.S. have typically declined on a year-over-year basis. While generic markets experienced significant price inflation from 2013 to 2015, and despite some evidence of a moderation in the rate of erosion in 2018, price decreases of approximately 10% per year have been common in recent years. Internationally, prices of generic drug products have tended to be more stable. The activities and infrastructure needed to commercialize generic products internationally vary by country, and that fragmentation makes entering those markets more challenging for U.S.-focused companies.

        Our products primarily address pain management, ADHD and addiction disorders. Despite a contraction in the market for opioid products, especially in the U.S., acetaminophen and opioids are still viewed as the standard of care for many types of pain. Pain management represents the second largest therapeutic area in the U.S. based upon prescriptions dispensed, with pain medications

60


accounting for approximately one out of every 11 dispensed prescriptions in 2018. We expect the decline in usage rates for opioids in the U.S. to continue, stabilizing at levels consistent with new treatment guidelines being developed by the medical community. Globally, we expect the use of acetaminophen and opioids to trend with population rates for the foreseeable future. ADHD is an established therapeutic category in the U.S. and is increasingly recognized and treated in other parts of the world. Substance abuse and dependence continues to impact communities worldwide, and as the problem becomes more widespread, medically assisted treatment is expected to grow as well. We expect modest growth globally for these treatments over the near term, with much stronger double-digit growth in the U.S. as attitudes regarding treatment change and as government and private funding increases.

        Broadly, the manufacturing base for APIs and complex generic pharmaceuticals has seen a substantial shift to India and China over the last two decades. There is some evidence of this shift being reversed in response to recent quality and reliability issues and the need for greater supply flexibility. However, we believe manufacturers in India and China will continue to be important suppliers in the API and generics supply chain. The U.S. market for controlled APIs and generic pharmaceuticals has not been impacted by this trend due to DEA regulations requiring the manufacturing of most APIs and finished drugs within U.S. borders. We do not expect these regulations to change for the foreseeable future, and as a result, ex-U.S. manufacturers are penetrating the market through development of U.S. operations, increasing historical levels of competition and pricing pressure similar to non-controlled generics. Our ability to compete internationally, however, also depends upon similar border controls in other countries. Such border controls are not in place for acetaminophen, and the majority of the global market is supplied by China. We believe our status as the only supplier of acetaminophen in the North American and European regions, coupled with our product quality, service, and history in the market working with a developed and growing customer base gives us a competitive advantage which allows us to compete despite significant ongoing downward price pressures globally.

Competition

        Our complex generic pharmaceutical products compete with many other companies in highly fragmented markets, primarily in the U.S. Our competitors vary depending upon therapeutic and product categories. Major competitors of our complex generic pharmaceutical products include: Endo International plc, Teva Pharmaceutical Industries Ltd., Amneal Pharmaceutical Ltd., Mylan N.V., Rhodes Pharmaceuticals, Hikma Pharmaceuticals, KVK Tech, Inc., Alvogen and Aurobindo Pharma Ltd., among others. Major competitors of our API products include Noramco, Johnson Matthey, Siegfried and others in controlled substances, and various Chinese manufacturers of acetaminophen. We believe our secure sources of opioid raw materials, vertically integrated manufacturing capabilities, broad offerings of API controlled substances and acetaminophen, comprehensive generic controlled substances product line and established relationships with national and regional distributors of generic drugs in the U.S. enable us to compete with larger generic manufacturers. In addition, we believe that our experience with the FDA, DEA and Risk Evaluation and Mitigation Strategies ("REMS") provides us the knowledge to operate efficiently and effectively in this highly regulated, competitive environment. Our business faces intense competition from other generic drug manufacturers, brand-name pharmaceutical companies marketing authorized generics, existing branded equivalents, and manufacturers of therapeutically similar drugs. The competition varies depending upon the specific product category and dosage strength. Among the large generic controlled substance providers, we are one of the only generic manufacturers that has its own controlled substance API manufacturing capability, and we believe that we offer more vertically integrated generic controlled substance products than any other U.S. manufacturer. New drugs and future developments in improved or advanced drug delivery technologies or other therapeutic techniques may provide therapeutic or cost advantages when compared to the products we sell.

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        Our current or future products could be rendered obsolete or uneconomical as a result of the competition described above and the factors described in "Intellectual Property" below. Our failure to compete effectively could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

Intellectual Property

        Our development of high-quality complex generic pharmaceutical products is dependent, in part, on our ability to either invalidate the Orange Book listed patents protecting the branded product for which we are seeking to launch a generic or develop a generic version of the branded product that does not infringe those patents. The development of these generic pharmaceutical products is characterized by extensive patent litigation, and we may from time to time be a party to such litigation. Companies that produce branded pharmaceutical products routinely bring litigation against manufacturers of generic products upon the filing of an ANDA or similar submission that seek regulatory approval to manufacture and market generic forms of their branded products, alleging patent infringement or other violations of intellectual property rights. Patent holders may also bring patent infringement suits against companies that are currently marketing and selling approved generic products. Litigation often involves significant expense and can delay or prevent introduction or sale of our generic products. If the Orange Book patents listed for a branded product are held valid, enforceable and infringed by our products, we would, unless we could obtain a license from the patent holder, need to delay selling our corresponding generic product until the latest expiration of the Orange Book patents listed for the branded product. A successful claim of patent or other intellectual property infringement against us could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

        We own or license a number of patents in the U.S. and other countries covering certain products and have also developed brand names and trademarks for those and other products. We consider the overall protection of our patents, trademarks and license rights to be of material value and act to protect these rights from infringement. However, our business is not materially dependent upon any single patent, trademark or license or any group of patents, trademarks or licenses.

        Patent protection of active ingredients, intermediates or processes for manufacture thereof can either provide market exclusivity or a manufacturing cost or product quality advantage. Patents may cover, among other things, the active ingredient(s), various uses of a drug product, pharmaceutical formulations, drug delivery mechanisms, and processes for (or intermediates used in) the manufacture of products. Protection for individual products extends for varying periods in accordance with the expiration dates of patents in the various countries. The protection afforded, which may also vary from country to country, depends upon the type of patent, its scope of coverage and the availability of meaningful legal remedies in the country.

        We estimate the likely market exclusivity period for each of our products on a case-by-case basis. It is not possible to predict with certainty the length of market exclusivity for any of our products because of the complex interaction between patent and regulatory forms of exclusivity, the relative success or lack thereof by potential competitors' experience in product development and inherent uncertainties concerning patent litigation.

        In addition to patents and regulatory forms of exclusivity, we also market products with trademarks. Trademarks have no effect on market exclusivity for a product, but are considered to have marketing value. Trademark protection continues in some countries as long as used; in other countries, as long as registered. Registrations of such trademarks are for fixed terms and subject to renewal as provided by the laws of the particular country. With respect to certain of our API products, we rely on a combination of patents, trademarks, trade secrets, proprietary know-how, market exclusivity gained from the regulatory approval process and other intellectual property to support our business strategy.

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Research and Development

        We devote significant resources to research and development ("R&D"). Our R&D group is comprised of a number of highly experienced, trained and skilled individuals, with nearly 20% holding Ph.D. degrees.

        We are developing a number of complex generic pharmaceutical products that take advantage of our API and drug product manufacturing capabilities as well as our experience in working with APIs and contract manufacturing organizations. We currently have five ANDAs at various stages of review with the FDA and a diverse portfolio of oral solid and parenteral formulations under development. Our pipeline is focused on applying our capabilities to develop difficult formulations, utilizing our expertise in working with controlled substances to develop potent products, and expanding both our therapeutic and technology platforms into areas with less competitive pressure. We utilize our proven abilities to design around competitor patents to advantage both our API and drug product development opportunities and to create our own intellectual property.

Select Products in Development

        Our pipeline contains a diverse and balanced set of generic and Section 505(b)(2) drug product development projects across a range of therapeutic areas and complexities that we expect will begin to provide meaningful incremental revenue from 2022 and thereafter. The following capabilities are at the core of our pipeline efforts:

    Specialized characterization allowing for the deformulation of existing reference listed drugs providing a roadmap for formulation development and also allowing for clinical bio-waivers when FDA product guidance suggests characterization can suffice;

    Formulation of tablets, capsules, drug-device combinations and oral liquid products in novel ways to mimic, but not infringe upon patented delivery systems; and

    Extensive experience, know how, and infrastructure to work with both controlled and potent active ingredients.

        While all of these capabilities are deployed across developmental programs in our pipeline, there is no guarantee that all of the products within our pipeline will be successfully commercialized.

Pilot Plant

        To facilitate our development efforts, we have a multipurpose commercial production facility and pilot plant in Saint Louis, Missouri, where we can test and scale our manufacturing processes for new products without impacting our Hobart, New York facility. This also allows us to more rapidly and economically develop certain drug product submissions, all under one roof at our pilot plant, with a limited amount of API or drug product. This facility was converted to dual purpose for both pilot and commercial manufacturing in 2018, and the first product to launch from this facility is expected in 2019.

Regulatory Matters

Quality Assurance Requirements

        The FDA enforces regulations to ensure that the methods used in, and the facilities and controls used for, the manufacture, processing, packaging and holding of drugs conform to current good manufacturing practice ("cGMP"). The cGMP regulations that the FDA enforces are comprehensive and cover all aspects of manufacturing operations, from receipt of raw materials to finished product distribution, and are designed to ensure that the finished products meet all the required identity, strength, quality and purity characteristics. Other regulatory authorities have their own cGMP rules.

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Ensuring compliance requires a continuous commitment of time, money and effort in all operational areas.

        The FDA conducts pre-approval inspections of facilities engaged in the development, manufacture, processing, packaging, testing and holding of the drugs subject to ANDAs. If the FDA concludes that the facilities to be used do not or did not meet cGMP, good laboratory practice ("GLP") or good clinical practice ("GCP") requirements, it will not approve the application. Corrective actions to remedy the deficiencies must be performed and are usually verified in a subsequent inspection. In addition, manufacturers of both pharmaceutical products and API used to formulate the drug also ordinarily undergo a pre-approval inspection, although the inspection can be waived when the manufacturer has had a passing cGMP inspection in the recent past. Failure of any facility to pass a pre-approval inspection will result in delayed approval and could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

        The FDA also conducts periodic inspections of drug and device facilities to assess their cGMP status. If the FDA were to find serious cGMP non-compliance during such an inspection, it could take regulatory actions that could materially adversely affect our business, results of operations, financial condition and cash flows. Additionally, imported API and other components needed to manufacture products could be rejected by U.S. Customs and Border Protection, usually after conferring with the FDA. In the case of domestic facilities, the FDA could initiate product seizures or, in some instances, require product recalls and seek to enjoin a product's manufacture and distribution. In certain circumstances, violations could support civil penalties and criminal prosecutions. In addition, if the FDA concludes that a company is not in compliance with cGMP requirements, sanctions may be imposed that include preventing that company from receiving the necessary licenses to export its products and classifying that company as an "unacceptable supplier," thereby disqualifying that company from selling products to federal agencies.

United States

        In general, drug manufacturers operate in a highly regulated environment. In the U.S., we must comply with laws, regulations, guidance documents and standards promulgated by the FDA, the Department of Health and Human Services ("DHHS"), the DEA, the Environmental Protection Agency ("EPA"), the Customs Service and state boards of pharmacy.

        The FDA's authority to regulate the safety and efficacy of pharmaceuticals comes from the U.S. Federal Food, Drug and Cosmetic Act ("FFDCA"). In addition to reviewing New Drug Applications ("NDAs") for branded drugs and ANDAs for generic drugs, the FDA has the authority to ensure that pharmaceutical products introduced into interstate commerce are neither "adulterated" nor "misbranded." Adulterated means that the product may cause or has caused injury to patients when used as intended because it fails to comply with cGMP. Misbranded means that the labels of, or promotional materials for, the product contain false or misleading information. Failure to comply with applicable FDA and other federal and state regulations could result in product recalls or seizures, partial or complete suspension of manufacturing or distribution, refusal to approve pending applications, and the imposition of monetary fines, civil penalties or criminal prosecution.

        In order to market and sell a generic version of an already approved drug product, a drug manufacturer must file an ANDA that shows that the generic version is "therapeutically equivalent," or expected to have the same clinical effect and safety profile as the branded drug product when administered to patients under the conditions specified in the labeling.

        For controlled substances, the manufacture, marketing and selling of certain drug products may be limited by quota grants for controlled substances by the DEA.

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        ANDA Process.    The path leading to FDA approval of an ANDA is much different from that of a NDA. By statute, the FDA waives the requirement for a drug manufacturer to complete certain pre-clinical studies and clinical safety and efficacy trials and instead focuses on data establishing bioequivalence between the branded or Referenced Listed Drug ("RLD") and the ANDA product. Bioequivalence studies generally involve comparing the absorption rate and concentration levels of the active ingredient in a generic drug in the human body to that of the RLD. In the event that the active ingredient in the generic drug behaves in the same manner in the human body as the RLD, the two drug products are considered bioequivalent. The FDA considers a generic drug therapeutically equivalent, and therefore substitutable, if it is also the same dosage form, route of administration and strength as the RLD.

        In 2010, the U.S. Congress passed into law the Generic Drug User Fee Act to address the FDA's backlog, which at the time was over 2,000 ANDAs. This legislation granted the FDA authority to collect, for the first time, user fees from generic drug manufacturers who submit ANDAs for review and approval. Under the Generic Drug User Fee Amendments of 2017, the fiscal 2019 user fee rate is set at $178,000 for an ANDA and the prior approval supplement to an ANDA fee was removed. These fees are expensed as incurred. The FDA has set goal dates by fiscal year for ANDA submissions to improve the average review time. The FDA has set a target of approving 90% of ANDA submissions within 10 months of submission for submissions made in 2019.

        Aside from the backlog described above, the timing of FDA approval of ANDAs depends on other factors, including whether an ANDA holder has challenged any listed patents to the RLD and whether the RLD is entitled to one or more periods of marketing exclusivity under the FFDCA (such as pediatric exclusivity under the Best Pharmaceuticals for Children Act). In general, the FDA will not grant final approval of (but will continue to review) an ANDA in which the RLD holder has sued, within 45 days of receiving a Paragraph IV notice of the ANDA filing, the ANDA holder for patent infringement until either the litigation has been resolved or 30 months have elapsed, whichever is earlier.

        Patent and Non-Patent Exclusivity Periods.    A sponsor of a NDA is required to identify in its application any patent that claims the drug or a use of the drug subject to the application. Upon NDA approval, the FDA lists these patents in the Orange Book: Approved Drug Products with Therapeutic Equivalence ("the Orange Book"). Any person that files a Section 505(b)(2) NDA, the type of NDA that relies upon the data in the application for which the patents are listed, or an ANDA to secure approval of a generic version of a previous drug, must make a certification in respect to listed patents. The FDA may not approve such an application for the drug until expiration of the listed patents unless the generic applicant certifies that the listed patents are invalid, unenforceable or not infringed by the proposed generic drug and gives notice to the holder of the NDA for the RLD of the bases upon which the patents are challenged, and the holder of the RLD does not sue the later applicant for patent infringement within 45 days of receipt of notice. If an infringement suit is filed, the FDA may not approve the later application until the earliest of: (a) 30 months after receipt of the notice by the holder of the NDA for the RLD; (b) entry of an appellate court judgment holding the patent invalid, unenforceable or not infringed; (c) such time as the court may order; or (d) the expiration of the patent.

        One of the key motivators for challenging patents is the 180-day market exclusivity period ("generic exclusivity") granted to the developer of a generic version of a product that is the first to file an ANDA containing a Paragraph IV certification and that prevails in litigation with the manufacturer of the branded product over the applicable patent(s), is not sued, or enters into a settlement agreement with the manufacturer of the branded product. For a variety of reasons, there are situations in which a company may not be able to take advantage of an award of generic exclusivity. The determination of when generic exclusivity begins and ends is very complicated as it depends on several different factors.

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        The holder of the NDA for the RLD may also be entitled to certain non-patent exclusivity during which the FDA cannot approve an application for a competing generic product or 505(b)(2) NDA product. Generally, if the RLD is a new chemical entity, the FDA may not accept for filing any application that references the innovator's NDA for five years from the approval of the innovator's NDA. However, this five-year period is shortened to four years where a filer's ANDA includes a Paragraph IV certification. In other cases, where the innovator has provided certain clinical study information, the FDA may accept for filing, but may not approve, an application that references the innovator's NDA for a period of three years from the approval of the innovator's NDA.

        Certain additional periods of exclusivity may be available if the RLD is indicated for use in a rare disease or condition, or is studied for pediatric indications.

        Risk Evaluation and Mitigation Strategies ("REMS").    For certain drug products or classes, such as transmucosal immediate-release fentanyl ("TIRF") products and solid oral dosage form opioid products, the FDA has the authority to require the manufacturer to provide a REMS that is intended to ensure that the benefits of a drug product (or class of drug products) outweigh the risks of harm. The FDA may require that a REMS program include elements to ensure safe use to mitigate a specific serious risk of harm, such as providing prescriber education or restricting the dispensing of the drug product to certain healthcare settings. The FDA has the authority to impose civil penalties on or take other enforcement action against any drug manufacturer who fails to properly implement an approved REMS program.

        In December 2011, the FDA approved a single, class-wide REMS program for TIRF products (called the "TIRF REMS Access Program"). TIRF products are opioids used to manage pain in adults with cancer who routinely take other opioid pain medicines around-the-clock. We were part of the original industry working group that collaborated to develop and implement the TIRF REMS Access Program. The goals of this program are to ensure patient access to important medications and mitigate the risk of misuse, abuse, addiction, overdose and serious complications due to medication errors by: (a) prescribing and dispensing only to appropriate patients, including use only in opioid-tolerant patients; (b) preventing inappropriate conversion between fentanyl products; (c) preventing accidental exposure to children and others for whom such products were not prescribed; and (d) educating prescribers, pharmacists and patients on the potential for misuse, abuse, addiction and overdose. This program started in March 2012 and requires manufacturers, distributors, prescribers, dispensers and patients to enroll in a real-time database that maintains a closed-distribution system, where the products can only be prescribed, dispensed and utilized by registered prescribers, pharmacies and patients in the system.

        In February 2009, the FDA requested that drug manufacturers help develop a single, shared REMS for extended-release and long-acting ("ERLA") opioid products that contain fentanyl, hydromorphone, methadone, morphine, oxycodone and oxymorphone. In April 2009, the FDA announced that the "REMS would be intended to ensure that the benefits of these drugs continue to outweigh the risks associated with: (1) use of high doses of long-acting opioids and extended-release opioid products in non-opioid-tolerant and inappropriately selected individuals; (2) abuse; (3) misuse; and (4) overdose, both accidental and intentional." We were part of the original industry working group that collaborated to develop and implement this REMS program. In July 2012, the FDA approved a class-wide REMS program, the "Extended-Release and Long-Acting Opioid Analgesics REMS," that affected more than 30 extended-release and long-acting opioid analgesics (both branded and generic products). This REMS program requires drug manufacturers to make training on appropriate prescribing practices available for healthcare providers ("HCPs") who prescribe these opioid analgesics and to distribute educational materials on their safe use to prescribers and patients. On September 18, 2018, the FDA approved the final "Opioid Analgesic Risk Evaluation and Mitigation Strategy ("REMS")." This REMS now includes immediate release opioid products used in outpatient settings as

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well as the extended-release and long-acting opioid products that have already been subject to a REMS since 2012.

        The goal of the Opioid Analgesic REMS is to reduce unnecessary and/or inappropriate exposure to opioids by providing HCPs with information on appropriate prescribing recommendations and helping HCPs learn how to identify abuse by individual patients and know how to get patients with opioid use disorder into treatment. The Opioid Analgesic REMS program requires HCP training be made available to all HCPs involved in the management of patients with pain, including nurses and pharmacists. We participate with other opioid product companies to provide unrestricted grants to accredited continuing education providers for the development of education courses for HCPs based on the FDA's "Opioid Analgesic REMS Education Blueprint for Health Care Providers Involved in the Treatment and Monitoring of Patients with Pain."

        Drug Enforcement Administration.    The DEA is the U.S. federal agency responsible for domestic enforcement of the Controlled Substances Act of 1970 ("CSA"). The CSA classifies drugs and other substances based on identified potential for abuse. Schedule I controlled substances, such as heroin and LSD, have a high abuse potential and have no currently accepted medical use; thus, they cannot be lawfully marketed or sold. Opioids, such as oxycodone, oxymorphone, morphine, fentanyl and hydrocodone, are Schedule II controlled substances. Consequently, the manufacture, storage, distribution and sale of these substances are highly regulated.

        The DEA regulates the availability of API, products under development and marketed drug products that are classified as Schedule II or III by setting annual quotas. Every year, we must apply to the DEA for manufacturing API quota and procurement quota to manufacture finished dosage products. Given that the DEA has discretion to grant or deny our manufacturing and procurement quota requests, the quota the DEA grants may be insufficient to meet our commercial needs. In calendar 2018, manufacturing and procurement quotas granted by the DEA were sufficient to meet our sales and inventory requirements on most products.

        In December 2018, the DEA reduced the quota of the six most frequently misused opioids that may be manufactured in the U.S. in calendar year 2019 by an average of 10% as compared to the 2018 amount. The DEA has complete discretion to adjust or leave unchanged these quotas from time to time during the calendar year and to allocate manufacturing and procurement quota to manufacturers. A delay or refusal by the DEA to grant, in whole or in part, our quota requests for controlled substances could delay or result in the stoppage of the manufacture of our pharmaceutical products or our product launches, and could require us to allocate product among our customers.

        DEA regulations make it extremely difficult for a manufacturer in the U.S. to import finished dosage forms of controlled substances manufactured outside the U.S. These rules reflect a broader enforcement approach by the DEA to regulate the manufacture, distribution and dispensing of legally produced controlled substances. Accordingly, drug manufacturers who market and sell finished dosage forms of controlled substances in the U.S. typically manufacture or have them manufactured in the U.S.

        The DEA also requires drug manufacturers to design and implement a system that identifies suspicious orders of controlled substances, such as those of unusual size, those that deviate substantially from a normal pattern and those of unusual frequency, prior to completion of the sale. A compliant suspicious order monitoring ("SOM") system includes well-defined due diligence, "know your customer" efforts and order monitoring. In addition, as more fully described in "—Legal Proceedings" herein, as part of a 2017 resolution of a DEA investigation, one of our subsidiaries agreed, among other things, to utilize all available transaction information to identify suspicious orders of any Mallinckrodt product and to report to the DEA when it concludes that chargeback data or other information indicates that a downstream registrant poses a risk of diversion.

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        To meet its responsibilities, the DEA conducts periodic inspections of registered establishments that handle controlled substances. Annual registration is required for any facility that manufactures, tests, distributes, dispenses, imports or exports any controlled substance. The facilities must have the security, control and accounting mechanisms required by the DEA to prevent loss and diversion. Failure to maintain compliance, particularly as manifested in loss or diversion, can result in regulatory action that could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows. The DEA may seek civil penalties, refuse to renew necessary registrations or initiate proceedings to revoke those registrations. In certain circumstances, violations could lead to criminal proceedings.

        Individual states also regulate controlled substances, and we, as well as our third-party API suppliers and manufacturers, are subject to such regulation by several states with respect to the manufacture and distribution of these products.

        We and, to our knowledge, our third-party API suppliers, dosage form manufacturers, distributors and researchers have all necessary registrations, and we believe all registrants operate in conformity with applicable registration requirements, under controlled substance laws.

        Government Benefit Programs.    Statutory and regulatory requirements for Medicaid, Medicare, Tricare and other government healthcare programs govern provider reimbursement levels, including requiring that all pharmaceutical companies pay rebates to individual states based on a percentage of their net sales arising from Medicaid program-reimbursed products. The federal and state governments may continue to enact measures in the future aimed at containing or reducing payment levels for prescription pharmaceuticals paid for in whole or in part with government funds. We cannot predict the nature of such measures, which could have material adverse consequences for the pharmaceutical industry as a whole and, consequently, also for us. However, we believe we have provided for our best estimate of potential refunds based on currently available information.

        From time to time, legislative changes are made to government healthcare programs that impact our business. For example, the Medicare Prescription Drug Improvement and Modernization Act of 2003 created a new prescription drug coverage program for people with Medicare through a new system of private market drug benefit plans. This law provides a prescription drug benefit to seniors and individuals with disabilities in the Medicare program ("Medicare Part D"). Congress continues to examine various Medicare policy proposals that may result in pressure on the prices of prescription drugs in the Medicare program.

        In addition, the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Affordability Reconciliation Act of 2010 (collectively, the "Healthcare Reform Act") provided for major changes to the U.S. healthcare system, which impacted the delivery and payment for healthcare services in the U.S. Our business has been most notably impacted by rebates from the Medicaid Fee-For-Service Program and Medicaid Managed Care plans and the imposition of an annual fee on branded prescription pharmaceutical manufacturers. Medicaid provisions reduced net sales by $15.3 million, $22.3 million, $28.1 million and $5.1 million in fiscal 2018, 2017, 2016 and the three months ended December 30, 2016, respectively. The fiscal 2018 decrease in provisions for Medicaid payments was primarily driven by decreases in provisions of $4.2 million and $3.8 million associated with Other controlled substances and Hydrocodone (API) and hydrocodone containing tablets, respectively, partially offset by a $1.6 million provision increase for Oxycodone (API) and oxycodone containing tablets. The decrease in provisions was due to lower net sales of generics and API products in fiscal 2018. The fiscal 2017 decrease was primarily driven by decreases in provisions of $3.9 million and $1.5 million associated with Other controlled substances and Oxycodone (API) and oxycodone containing tablets, respectively, partially offset by a $1.0 million provision increase for Hydrocodone (API) and hydrocodone containing tablets. The decrease in provisions were due to lower net sales in fiscal 2017. We were also impacted by the annual fee on branded prescription

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pharmaceutical manufacturers, which is not tax deductible, and recorded expense of $0.4 million, $0.2 million, $2.2 million and $0.9 million in fiscal 2018, 2017, 2016 and the three months ended December 30, 2016, respectively, within SG&A.

Healthcare Fraud and Abuse Laws

        We are subject to various federal, state and local laws targeting fraud and abuse in the healthcare industry. For example, in the U.S., there are federal and state anti-kickback laws that prohibit the payment or receipt of kickbacks, bribes or other remuneration intended to induce the purchase or recommendation of healthcare products and services or reward past purchases or recommendations, including the U.S. Anti-Kickback Statute and similar state statutes, the False Claims Act and the Health Insurance Portability and Accountability Act of 1996. Violations of these laws can lead to civil and criminal penalties, including fines, imprisonment and exclusion from participation in federal healthcare programs. These laws apply to hospitals, physicians and other potential purchasers of our products and are potentially applicable to us as both a manufacturer and a supplier of products reimbursed by federal healthcare programs. In addition, some states in the U.S. have enacted compliance and reporting requirements aimed at drug manufacturers.

        We are also subject to the Foreign Corrupt Practices Act of 1977 ("FCPA") and similar worldwide anti-bribery laws in non-U.S. jurisdictions, such as the U.K. Bribery Act of 2010, which generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Because of the predominance of government-sponsored healthcare systems around the world, most of our customer relationships outside of the U.S. are with governmental entities and are therefore subject to such anti-bribery laws. Our policies mandate compliance with these anti-bribery laws; however, we operate in many parts of the world that have experienced governmental corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. Despite our training and compliance programs, our internal control policies and procedures may not protect us from reckless or criminal acts committed by our employees or agents.

Compliance Programs

        In order to systematically and comprehensively mitigate the risks of non-compliance with regulatory requirements described in this section of the information statement, we have developed what we believe to be robust compliance programs based on the April 2003 Office of the Inspector General ("OIG") Compliance Program Guidance for Pharmaceutical Manufacturers, the U.S. Federal Sentencing Guidelines, the Pharmaceutical Research and Manufacturers of America Code on Interactions with Healthcare Professionals, the Code of Ethics of the Advanced Medical Technology Association, the U.K. Anti-Bribery guidance, and other relevant guidance from government and national or regional industry codes of behavior. We conduct ongoing compliance training programs for all employees and maintain a 24-hour ethics and compliance reporting hotline with a strict policy of non-retaliation. Our compliance programs are facilitated by our Chief Compliance Officer, who reports directly to the General Counsel and to the Audit Committee of our board of directors. The Compliance function is independent of the manufacturing and commercial operations functions and is responsible for implementing our compliance programs.

        We have implemented a comprehensive controlled substances compliance program, including anti-diversion efforts and we regularly assist federal, state and local law enforcement and prosecutors in the U.S. by providing information and testimony on our products and placebos for use by the DEA and other law enforcement agencies in investigations and at trial. As part of this program, we also work with some of our customers to help develop and implement what we believe are best practices for Suspicious Order Monitoring and other anti-diversion activities.

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        We believe the design of our compliance programs also addresses our FDA, healthcare anti-kickback, anti-fraud, and anti-bribery-related risks. We believe we have complied with the reporting obligations of the U.S. Federal Physician Payment Sunshine Act and relevant state disclosure laws and have implemented a program across our company to track and report data per Centers for Medicare and Medicaid Services ("CMS") guidance and state disclosure requirements.

Outside the United States

        Outside the U.S., we must comply with laws, guidelines and standards promulgated by other regulatory authorities that regulate the development, testing, manufacturing, distribution, marketing and selling of pharmaceuticals, including, but not limited to, Health Canada, the Medicines and Healthcare Products Regulatory Agency in the U.K., the Irish Medicines Board, the European Medicines Agency and member states of the European Union, the State Food and Drug Administration in China, the Therapeutic Goods Administration in Australia, the New Zealand Medicines and Medical Devices Safety Authority, the Ministry of Health and Welfare in Japan, the European Pharmacopoeia of the Council of Europe and the International Conference on Harmonization. Although international harmonization efforts continue, many laws, guidelines and standards differ by region or country.

Environmental

        Our operations, like those of other pharmaceutical companies, involve the use of substances regulated under environmental laws, primarily in manufacturing processes and, as such, we are subject to numerous federal, state, local and non-U.S. environmental protection and health and safety laws and regulations. We cannot provide assurance that we have been or will be in full compliance with environmental, health and safety laws and regulations at all times. Certain environmental laws assess strict (i.e., can be imposed regardless of fault), joint and several liability on current or previous owners of real property and current or previous owners or operators of facilities for the costs of investigation, removal or remediation of hazardous substances or materials at such properties or at properties at which parties have disposed of hazardous substances. We have, from time to time, received notification from the EPA and from state environmental agencies in the U.S. that conditions at a number of sites where the disposal of hazardous substances has taken place requires investigation, cleanup and other possible remedial actions. These agencies may require that we reimburse the government for costs incurred at these sites or otherwise pay for the cost of investigation and cleanup of these sites, including compensation for damage to natural resources. Primarily due to past operations, operations of predecessor companies or past disposal practices, we have projects underway at a number of current and former manufacturing facilities as well as former disposal sites to investigate and remediate environmental contamination, as further described under "—Legal Proceedings," in Note 13 to our unaudited condensed combined financial statements and in Note 19 to our audited combined financial statements included elsewhere in this information statement.

        We continue to be dedicated to environmental sustainability programs to minimize the use of natural resources and reduce the utilization and generation of hazardous materials from our manufacturing processes and to remediate identified environmental concerns. Environmental laws are complex and generally have become more stringent over time. We believe that our operations currently comply in all material respects with applicable environmental laws and regulations, and we have planned for future capital and operating expenditures to comply with these laws and to address liabilities arising from past or future releases of, or exposures to, hazardous substances. However, we cannot provide assurance that our costs of complying with current or future environmental protection, health and safety laws and regulations will not exceed our estimates or have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

        Further, we cannot provide assurance that we will not be subject to additional environmental claims for personal injury or cleanup in the future based on our past, present or future business

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activities. While it is not feasible to predict the outcome of all pending environmental matters, it is reasonably possible that there will be a need for future provisions for environmental costs that, in our opinion, are not likely to have a material adverse effect on our financial condition, but could be material to the results of operations in any one accounting period.

Raw Materials

        We contract with various third-party manufacturers and suppliers to provide us with raw materials used in our products, finished goods and certain services. If, for any reason, we are unable to obtain sufficient quantities of any of the raw materials, finished goods, services or components required for our products, it could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

        The active ingredients in the majority of our current generic products and certain products in development, including oxycodone, oxymorphone, morphine, fentanyl and hydrocodone, are listed by the DEA as Schedule II substances under the CSA. Consequently, their manufacture, shipment, storage, sale and use are subject to a high degree of regulation and the DEA limits the availability of narcotic raw materials and the production of APIs and generic Schedule II products. As discussed under "Regulatory Matters," we must annually apply to the DEA for manufacturing and procurement quotas in order to obtain and produce these substances.

Sales, Marketing and Customers

Sales and Marketing

        We distribute our generic products primarily through wholesalers and distributors. We sell and distribute API directly to other pharmaceutical manufacturers and through distributors and agents in certain parts of the world.

Customers

        Net sales to distributors that accounted for more than 10% of our total net sales in fiscal 2018, 2017, 2016 and the three months ended December 30, 2016 were as follows:

 
  Fiscal Year Ended   Three Months
Ended
 
(Dollars in Millions)
  December 28,
2018
  December 29,
2017
  September 30,
2016
  December 30,
2016
 

AmerisourceBergen Corporation

    25 %   10 %   12 %   14 %

McKesson Corporation

    14 %   20 %   23 %   22 %

        No other customer accounted for 10% or more of our net sales in the above periods presented.

Manufacturing and Distribution

        As of December 28, 2018, we had five manufacturing sites located in the U.S., which handle production, assembly, quality assurance testing, packaging and sterilization of products.

        In certain countries outside the U.S., we utilize third-party distribution centers. Products generally are delivered to these distribution centers from our manufacturing facilities and then subsequently delivered to the customer. In some instances, product is delivered directly from our manufacturing facility to the customer. We contract with a wide range of transport providers to deliver our products by road, rail, sea and air.

        We utilize contract manufacturing organizations ("CMOs") to manufacture certain of our finished goods that are available for resale. We also manufacture drug products and APIs for our customers.

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Backlog

        As of December 28, 2018, the backlog of firm orders was less than 1% of net sales. We anticipate that substantially all of the backlog as of December 28, 2018 will be shipped during fiscal 2019.

Seasonality

        We have historically experienced fluctuations in our business resulting from seasonality, including lower operating cash flows during the period in which we pay annual employee compensation. DEA quota for raw materials and final dosage products are allocated in each calendar year to companies and may impact our sales until the DEA grants additional quota, if any. Impacts from quota limitations are most commonly experienced during the third and fourth calendar quarters, and we have experienced lower net sales in DEA-controlled products during the fourth calendar quarter. While we have experienced these fluctuations in the past, they may not be indicative of what we will experience in the future.

Employees

        As of December 28, 2018, we had approximately 1,600 employees, of which less than 2% are based outside the U.S.

Properties

        Our principal executive offices are located in Saint Louis, Missouri. As of December 28, 2018, we owned a total of five facilities in the U.S. Our owned facilities consist of approximately 1.9 million square feet, and our leased facilities consist of approximately 0.1 million square feet. We believe all of these facilities are well-maintained and suitable for the operations conducted within them.

Legal Proceedings

        We are subject to various legal proceedings and claims, including government investigations, environmental matters, product liability matters, patent infringement claims, employment disputes, contractual disputes and other commercial disputes, including those described below. We believe these legal proceedings and claims likely will be resolved over an extended period of time. Although it is not feasible to predict the outcome of these matters, we believe, unless indicated below, given the information currently available, that their ultimate resolution will not have a material adverse effect on our financial condition, results of operations and cash flows.

Opioid Related Matters

        Since 2017, multiple U.S. states, counties, other governmental persons or entities and private plaintiffs have filed lawsuits against certain entities of our company, as well as various other manufacturers, distributors, pharmacies, pharmacy benefit managers, individual doctors and/or others, asserting claims relating to defendants' alleged sales, marketing, distribution, reimbursement, prescribing, dispensing and/or other practices with respect to prescription opioid medications, including certain of our products. As of June 27, 2019, the cases we are aware of include, but are not limited to, approximately 2,078 cases filed by counties, cities, Native American tribes and/or other government-related persons or entities; approximately 137 cases filed by hospitals, health systems, unions, health and welfare funds or other third-party payers; approximately 99 cases filed by individuals and 9 cases filed by the Attorneys General for New Mexico, Kentucky, Rhode Island, Georgia, Florida, Alaska, New York, Hawaii, and Nevada. Certain of the lawsuits have been filed as putative class actions.

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    Federal Lawsuits

        Most pending federal lawsuits have been coordinated in a federal multi-district litigation ("MDL") pending in the U.S. District Court for the Northern District of Ohio. The MDL court has issued a series of case management orders permitting motion practice addressing threshold legal issues in certain cases, allowing discovery and setting a trial date of October 21, 2019 for two cases originally filed in the Northern District of Ohio by Summit County and Cuyahoga County against opioid manufacturers, distributors, and pharmacies. The counties claim that opioid manufacturers' marketing activities changed the medical standard of care for treating both chronic and acute pain, which led to increases in the sales of their prescription opioid products. They also allege that opioid manufacturers' and distributors' failure to maintain effective controls against diversion was a substantial cause of the opioid crisis.

        Summit County filed a complaint on December 20, 2017, an amended complaint that added us on April 25, 2018, and a second amended complaint on May 18, 2018. The manufacturer defendants jointly moved to dismiss the second amended complaint on May 25, 2018. Judge Polster, who is presiding over the MDL, has not yet ruled on the motion. Summit County filed a third amended complaint on March 21, 2019, which alleges violations of Racketeer-Influenced and Corrupt Organizations ("RICO"), the Ohio Corrupt Practices Act, statutory public nuisance, common law absolute public nuisance, negligence, common law fraud, violations of Injury Through Criminal Acts, unjust enrichment, and civil conspiracy. Summit County seeks damages including but not limited to actual damages, treble damages, equitable and/or injunctive relief, restitution, disgorgement of profits, compensatory and punitive damages, attorneys' fees, all costs and expenses of suit, and pre- and post-judgment interest. Cuyahoga County filed a complaint on October 21, 2017, and an amended complaint on April 25, 2018 that added us. Cuyahoga County filed a third amended complaint on May 10, 2019. The third amended complaint contains causes of action and damages similar to those in the Summit County litigation. We are also named in 221 similar state court cases in 30 states. These state court cases include actions filed by (1) state attorneys general; (2) counties, cities, and other municipalities; (3) district attorneys; (4) hospitals and other health systems; (5) individuals; (6) third-party payers; and (7) a Native American Tribe. There are differences between these cases. For instance, counties and cities often seek to recoup governmental expenses related to public services, while hospitals and other health systems typically seek compensation for opioid-related medical services. These cases also contain different causes of action. For example, state attorneys general complaints often utilize consumer protection statutes whereas third-party payers tend to focus on claims of fraud and breach of implied warranties. Further, not all lawsuits name the same defendants—some name manufacturers and distributors, while others also include pharmacies, pain clinics, doctors, and/or other individuals as defendants.

        On June 14, 2019, MDL Plaintiffs filed a Notice of Motion and Motion for Certification of Rule 23(b)(3) Cities/Counties Negotiation Class. On June 25, 2019, the named counties and cities presented a proposed class in their own names and on behalf of similarly situated U.S. counties and incorporated places to Judge Polster. The purpose of the class is to negotiate and potentially settle with defendants via a voting system wherein all county and municipal entities will be able to participate and vote to accept or reject any proposed resolution. The proposed class will not affect existing actions already filed against defendants.

    State Court Lawsuits

            

    A.
    Lawsuits Filed by State Attorneys General

        Nine state attorneys general have filed lawsuits against us in their respective state courts. The Florida Attorney General was the first attorney general to file suit against us on May 15, 2018. The Nevada Attorney General filed the most recent attorney general lawsuit against us on June 17, 2019. In general, the state attorneys general allege that opioid manufacturers engaged in fraudulent or

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misleading marketing activities that led to increases in the sales of their prescription opioid products. They also allege that opioid manufacturers and distributors failed to maintain effective controls against diversion and to identify, report, and halt suspicious orders. For example, on August 14, 2018, the New York Attorney General brought an action against Purdue in the coordinated opioid litigation in Suffolk County, New York. An amended complaint was filed on March 28, 2019, naming us, among other opioid manufacturers, distributors, and individuals. The amended complaint alleges state law violations of the New York State Finance Law, the New York Social Service Law, the New York General Business Law, the New York Controlled Substance Act, and the New York Executive Law, as well as public nuisance, fraud, gross negligence, willful misconduct, and unjust enrichment against us. The amended complaint seeks, among other remedies, declaratory judgment, injunctive relief, the creation of an abatement fund, damages, civil penalties, and the disgorgement of profits. Certain defendants, including us, filed motions to dismiss on May 31, 2019. The State of New York has until July 31, 2019 to oppose the motions and defendants will have until August 30, 2019 to reply. While the New York attorney general action is illustrative, there are differences between the cases filed by state attorneys general. Each lawsuit contains different causes of action, including different common law claims and alleged violations of state-specific statutes. The lawsuits also contain different claims for damages. For instance, the Kentucky and Hawaii actions seek punitive damages, but the Florida action does not. Further, not all lawsuits name the same defendants—some name manufacturers and distributors, while others also include pharmacies and/or individuals as defendants. There are currently no trials set in these cases.

    B.
    Lawsuits Filed by Cities, Counties, and Other Municipalities

        There are currently more than 195 lawsuits against us filed by cities, counties, and other municipalities, pending in various state courts in 22 states. The earliest lawsuit that remains in state court was filed by the County of Northampton, Pennsylvania on December 28, 2017. In general, the complaints allege that opioid manufacturers engaged in fraudulent or misleading marketing activities that led to increases in the sales of their prescription opioid products. They also allege that opioid manufacturers and distributors failed to maintain effective controls against diversion and to identify, report, and halt suspicious orders. For example, on May 16, 2018, Clark County filed an amended complaint in the Eighth Judicial District Court of Nevada and named us as a defendant, among other opioid manufacturers, distributors, and pharmacies. The amended complaint alleges violations of statutory public nuisance, common law public nuisance, negligent misrepresentation, negligence, and unjust enrichment. Clark County seeks damages including but not limited to compensatory and punitive damages, general damages, special damages, a fund for establishing a medical monitoring program, restitution and reimbursement, and attorneys' fees and costs. Defendants filed motions to dismiss on October 19, 2018, which were denied on March 19, 2019. On June 4, 2019, the court denied defendants' motion for partial reconsideration concerning their motions to dismiss. The case will proceed into discovery. While the Clark County action is illustrative, there are differences between the cases filed by cities, counties and other municipalities. These lawsuits contain different causes of action, including different common law claims and alleged violations of state-specific statutes. For example, municipalities in Louisiana, Maryland, Michigan, Pennsylvania, and Virginia assert violations of their state consumer protection statutes, while many other states do not. The lawsuits also contain different claims for damages. For example, the City of Granite and the County of Jersey, Illinois seek damages for particular public health expenditures, while municipalities in other states allege damages related more generally to costs for public services. Further, not all lawsuits name the same defendants—some name manufacturers and distributors, while others also include pharmacies and/or individuals as defendants. There are currently no trials set in these cases.

        In some jurisdictions, such as Connecticut, Illinois, New York, Pennsylvania, Texas, and West Virginia, certain of the 195 state lawsuits have been coordinated for pretrial proceedings before a single court within their respective state court systems. The first coordinated proceeding was formed in New York on July 31, 2017. The most recent state coordinated proceeding was formed in West Virginia on

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June 7, 2019. We are not named as a defendant in each case that may be pending in a particular state court MDL or coordinated proceeding. For example, approximately 44 cases filed by Texas counties are consolidated in the In re: Texas Opioid Litigation, No. 2018-63587, MDL No. 18-0358 (the "Texas MDL"), of which we are named in 11 cases. The Texas complaints generally allege violations of public nuisance, negligence, the Texas Controlled Substances Act, the Deceptive Trade Practices-Consumer Protection Act, unjust enrichment, common law fraud, and civil conspiracy, though there are differences between the complaints. Plaintiffs seek damages including but not limited to injunctive relief, economic and treble damages arising from alleged violations of the Texas Deceptive Trade Practices-Consumer Protection Act, civil penalties for violations of the Texas Controlled Substances Act, abatement of public nuisance, injunctive relief, punitive and actual damages, restitution, and attorneys' fees. We have filed answers in certain cases. A hearing on bellwether selection and other trial scheduling matters is currently scheduled on July 26, 2019. While the Texas MDL is illustrative, there are differences between the coordinated cases. Each states' coordinated proceedings contain different causes of action, including different common law claims and alleged violations of state-specific statutes. For example, municipalities in Connecticut, Illinois, New York, Pennsylvania, and Texas assert violations of their state unfair or deceptive trade practices acts, while other plaintiffs do not. The lawsuits also contain different claims for damages. For example, some of the cases in the Texas MDL request exemplary and punitive damages for gross negligence, while other cases do not. Further, not all lawsuits name the same defendants—some name manufacturers and distributors, while others also include pharmacies and/or individuals as defendants. Of the various coordinated actions, only one is currently set for trial. A Case Management Order has been entered in the New York consolidated cases in Suffolk County, which provides for two separate case tracks to proceed to discovery and ultimately to trial. We are named in the three Track One cases with a trial scheduled to begin on March 2, 2020.

    C.
    Lawsuits Filed by District Attorneys General

        Three District Attorneys General ("DAGs") have also filed lawsuits in state court against us. In general, they allege that defendants engaged in false and deceptive promotion of opioids and contributed to the oversupply and diversion of those products. They also allege that defendants' actions caused high addiction rates, overdose deaths, and increased rates of neonatal abstinence syndrome. The DAGs have initiated lawsuits against opioid manufacturers, distributors, prescribers, retailers, and other individuals. The DAGs allege that defendants participated in an illegal opioids market and that plaintiffs suffered damages related to increased law enforcement and health care costs, expenses related to rehabilitation and addiction treatment, prosecution costs, and foster care expenses, among others. Staubus et al. v. Purdue Pharma, LP et al., No. C-41916 was filed in the Circuit Court for Sullivan County on June 13, 2017 and amended on July 27, 2017 and February 15, 2018. We joined a motion to dismiss filed by the manufacturer defendants and filed a supplemental motion to dismiss regarding Company-specific claims on March 23, 2018. The court held a hearing on the motion to dismiss, in addition to other motions, on May 8, 2018. The court denied the motions to dismiss in an order filed on June 12, 2018. We filed an answer to the second amended complaint on June 29, 2018. The parties are currently engaged in discovery. Effler et al. v. Purdue Pharma, LP et al., No. 16596 was filed in the Circuit Court for Campbell County on September 29, 2017 and amended on October 6, 2017, January 10, 2018, and May 21, 2018. We joined a motion to dismiss filed by the manufacturer defendants on July 27, 2018. The court held a hearing on the motion to dismiss on October 4, 2018 and issued an order granting the manufacturer defendants' motion to dismiss on October 5, 2018. Plaintiffs filed a Notice of Appeal on November 1, 2018. We joined defendants-appellees' response brief which was filed on May 28, 2019. The parties are currently awaiting plaintiff-appellants' reply brief and oral argument is scheduled for July 18, 2019. Dunaway et al. v. Purdue Pharma, LP et al., No. CCI-2018-cv-6347 was filed in the Circuit Court for Cumberland County on January 10, 2018 and amended on August 7, 2018. We joined a motion to dismiss filed by the manufacturer defendants on September 21, 2018. Plaintiffs filed a second amended complaint on April 1, 2019, adding new defendants. A distributor defendant removed the action on May 3, 2019, and the district court

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remanded the case on May 22, 2019. Two pharmacy defendants filed a Motion to Amend the Agreed Scheduling Order on June 10, 2019. The court will hear the motion on June 19, 2019. There are currently no trials set in these cases.

    D.
    Lawsuits Filed by Hospitals and Health Systems

        Hospitals and other health systems have also filed lawsuits in state courts against us, and there are currently three such lawsuits. The first lawsuit that remains in state court was filed by Tucson Medical Center ("TMC") on October 9, 2018. The second lawsuit was filed by various hospitals and other health systems in West Virginia on April 29, 2019. The third lawsuit was filed by various hospitals and other health systems in Arizona on June 18, 2019. The plaintiffs allege that opioid manufacturers have engaged in fraudulent or misleading marketing activities that led to increases in the sales of their opioid products. They also allege that opioid manufacturers and distributors failed to maintain effective controls against diversion and to identify, report, and halt suspicious orders. For example, on October 9, 2018, TMC filed a complaint in the Pima County Superior Court, Arizona against us, among other opioid manufacturers and distributors. The complaint asserts claims for negligence, wanton negligence, negligence per se, negligent marketing, negligent distribution, nuisance, unjust enrichment, fraud and deceit, civil conspiracy, fraudulent concealment, and violations of Arizona's RICO Act and Consumer Fraud Act. TMC seeks damages and costs. Defendants have filed motions to dismiss the complaint, and the court held a three-day hearing on the motions, starting on June 12, 2019. While the TMC action is illustrative, there are differences between the cases. Each lawsuit contains different causes of action, including different common law claims and alleged violations of state-specific statutes. The lawsuits also name different defendants: TMC names manufacturers and distributors, while the other Arizona plaintiffs also include pharmacies as defendants, and the West Virginia plaintiffs include pharmacies and individuals as defendants. There are currently no trials set in these cases.

    E.
    Lawsuits Filed by Individuals

        Individuals have filed lawsuits in state courts against us, and there are currently six such lawsuits. The first lawsuit that remains in state court was initially filed by the Estate of Bruce Brockel in the Circuit Court of Mobile County, Alabama, on October 25, 2017, and amended to add us to plaintiff's first amended complaint on February 5, 2018. The most recent lawsuit that remains in state court was filed by plaintiff Robert Ruth in the 16th Judicial Circuit Court, Jackson County, Missouri, on May 23, 2019. In general, these lawsuits allege that opioid manufacturers have engaged in fraudulent or misleading marketing activities that led to increases in the sales of their opioid products. They also allege that opioid manufacturers and distributors failed to maintain effective controls against diversion and to identify, report, and halt suspicious orders. Individual plaintiffs generally claim that they suffered damages related to increased healthcare costs, or wrongful death. For example, on December 5, 2018, the Estate of Bruce Brockel filed a third amended complaint in the Circuit Court of Mobile County, Alabama against us, among other prescription opioid manufacturers and individual doctors. The complaint contains a variety of causes of actions, including medical malpractice, negligence, wantonness, Alabama extended manufacturer's doctrine, fraud and misrepresentation, suppression and concealment, deceit, unjust enrichment, and civil conspiracy. The plaintiff alleges that manufacturers engaged in the false and deceptive promotion of opioids, which led to the oversupply of opioids and caused decedent's death. The plaintiff seeks damages in an unspecified amount. We moved to dismiss the complaint on March 26, 2019. An opposition to the motion to dismiss was filed on April 25, 2019. The motion is currently pending. While the Brockel action is illustrative, there are differences between the cases filed by individuals. Many of these lawsuits contain different causes of action. For example, Brockel asserts a claim for civil conspiracy, while five of the individual actions filed in Missouri state court do not. The lawsuits also contain different claims for damages. For instance, the Robert Ruth lawsuit seeks disgorgement of profits, but the Brockel lawsuit does not. Further, not all

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lawsuits name the same defendants—for example, some name manufacturers, while others also include individuals as defendants. There are currently no trials set in these cases.

    F.
    Lawsuits Filed by Third-Party Payers

        Third-party payers, such as insurers, have also filed lawsuits in state courts against us. There are currently four such lawsuits. The first lawsuit that remains in state court was filed by UFCW, Local 23 and Employers Health Fund on April 24, 2018. The most recent lawsuits that remain in state court were filed by the International Brotherhood of Electrical Workers Local 98 Sound and Communication Health & Welfare Fund, and the International Brotherhood of Electrical Workers Local 98 Health & Welfare Fund; and the International Union of Painters and Allied Trades, District Council No. 21 Welfare Fund, both of which were filed on March 15, 2019. In general, plaintiffs allege that opioid manufacturers have engaged in fraudulent or misleading marketing activities that led to increases in the sales of their opioid products. They also allege that opioid manufacturers and distributors failed to maintain effective controls against diversion and to identify, report, and halt suspicious orders. Third-party payer plaintiffs claim that they paid costs for health issues stemming from opioid overuse. All four cases have been consolidated in the coordinated proceedings in Delaware County, Pennsylvania. The Pennsylvania complaints assert state law claims for violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law statute, public nuisance, negligence, unjust enrichment, common law fraud, breach of implied warranties, negligence per se, negligent misrepresentation, negligent marketing, and civil conspiracy. Defendants' joint preliminary objections await rulings and certain test cases are proceeding to discovery. There are differences between these four cases. Certain of these lawsuits contain different causes of action. For example, a case filed by Carpenters Health and Welfare Fund of Philadelphia and Vicinity asserts a claim for public nuisance, while Painters and Allied Trades does not. The lawsuits also contain different claims for damages. For instance, Carpenters Health seeks a declaratory judgment regarding plaintiffs' public nuisance claims, but Painters and Allied Trades does not. Further, not all lawsuits name the same defendants—some name manufacturers, while at least one lawsuit includes individuals as defendants. There are currently no trials set in these cases.

    G.
    Lawsuit Filed by Native American Tribe

        A Native American tribe has also filed a lawsuit in state court against us that remains in state court. On June 5, 2019, Cherokee Nation filed a complaint in the Circuit Court for St. Louis County, Missouri against us. Cherokee Nation alleges that we misled consumers about the risks of prescription opioids, used third-parties to promote false information about its opioids, and failed to prevent the diversion of its opioid products. The complaint asserts claims for fraud, nuisance, negligence and gross negligence, unjust enrichment, and civil conspiracy. Cherokee Nation seeks injunctive relief, civil penalties, compensatory damages, restitution, punitive damages, and attorneys' fees and costs. We have not yet filed a response.

        We intend to vigorously defend ourselves against all these lawsuits as detailed above and similar lawsuits that may be brought by others. Since these lawsuits are in early stages, we are unable to predict outcomes or estimate a range of reasonably possible losses.

    Investigations and Other Inquiries

        In addition to the lawsuits described above, certain entities that are or prior to the distribution will become our subsidiaries have received subpoenas and civil investigative demands ("CIDs") for information concerning the sale, marketing and/or distribution of prescription opioid medications and the Company's suspicious order monitoring programs, including from the DOJ and the Attorneys General for Missouri, New Hampshire, Kentucky, Washington, Alaska, South Carolina, Puerto Rico, New York, West Virginia, Indiana, and the Divisions of Consumer Protection and Occupational and Professional Licensing of the Utah Department of Commerce. We have been contacted by the coalition of State Attorneys General investigating the role manufacturers and distributors may have had in contributing to the increased use of opioids in the U.S. On January 27, 2018, we received a grand jury

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subpoena from the U.S. Attorneys' Office ("USAO") for the Southern District of Florida for documents related to the distribution, marketing and sale of generic oxymorphone products. On April 17, 2019, we received a grand jury subpoena from the USAO for the Eastern District of New York ("EDNY") for documents related to the sales and marketing of controlled substances, the policies and procedures regarding controlled substances, and other related documents. On June 4, 2019, we received a rider from the USAO for EDNY requesting additional documents. We are responding or have responded to these subpoenas, CIDs and any informal requests for documents.

        The Attorneys General for Kentucky, Alaska and New York have subsequently filed lawsuits against us. Similar subpoenas and investigations may be brought by others or the foregoing matters may be expanded or result in litigation. Since these investigations and/or lawsuits are in early stages, we are unable to predict outcomes or estimate a range of reasonably possible losses.

    New York State Opioid Stewardship Act

        On October 24, 2018, we filed suit in the United States District Court for the Southern District of New York against the State of New York, asking the court to declare New York State's Opioid Stewardship Act ("OSA") unconstitutional and to enjoin its enforcement. On December 19, 2018, the court declared the OSA unconstitutional and granted our motion for preliminary injunctive relief. On January 17, 2019, the State of New York appealed the Court's decision. We intend to vigorously assert our position in this matter. In April 2019, the State of New York passed its 2020 budget, which amended the OSA so that, if allowed by the Court, it would apply only to the sale or distribution of certain opioids in New York for 2017 and 2018 and, effective July 1, 2019, imposes an excise tax on certain opioids.

    DEA Investigation

        In November 2011 and October 2012, we received subpoenas from the DEA requesting production of documents relating to our suspicious order monitoring program for controlled substances. The USAO for the Eastern District of Michigan investigated the possibility that we failed to report suspicious orders of controlled substances during the period 2006-2011 in violation of the Controlled Substances Act and its related regulations. The USAO for the Northern District of New York and Office of Chief Counsel for the U.S. DEA investigated the possibility that we failed to maintain appropriate records and security measures with respect to manufacturing of certain controlled substances at our Hobart facility during the period 2012-2013. In July 2017, we entered into a final settlement with the DEA and the USAOs for the Eastern District of Michigan and the Northern District of New York to settle these investigations. As part of the agreement, we paid $35.0 million in fiscal 2017 to resolve all potential claims and agreed, as part of a Memorandum of Agreement ("MOA"), to utilize all available transaction information to identify suspicious orders of any of our controlled substance products and to report to the DEA when we conclude that chargeback data or other information indicates that a downstream registrant poses a risk of diversion, among other things. The MOA remains in effect until July 10, 2020, but we will continue utilizing all available transaction information to identify suspicious orders for reporting to the DEA beyond that date.

    House Energy and Commerce Committee Investigation of Opioid Marketing and Distribution

        In August 2018, we received a congressional letter requesting a range of documents relating to our marketing and distribution of opioids. We will cooperate with the investigation, and completed its first round of production in December 2018. The investigation is expected to resume with Democratic leadership of the House Committee and could ultimately result in a hearing in 2019.

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Other Matters

        Generic Pricing Subpoena.    In March 2018, we received a grand jury subpoena issued by the U.S. District Court for the Eastern District of Pennsylvania pursuant to which the Antitrust Division of the DOJ is seeking documents regarding generic products and pricing, communications with generic competitors and other related matters. We are in the process of responding to this subpoena, and we intend to cooperate fully in the investigation.

        Texas Pricing Investigation.    In November 2014, we received a CID from the Civil Medicaid Fraud Division of the Texas Attorney General's Office. According to the CID, the Attorney General's office is investigating the possibility of false reporting of information by us regarding the prices of certain of our drugs used by Texas Medicaid to establish reimbursement rates for pharmacies that dispensed our drugs to Texas Medicaid recipients. We responded to these requests. In December 2018, we entered into a final settlement with the Texas Attorney General's Office to resolve all potential claims in the investigation.

        MNK 2011 Inc. (formerly known as Mallinckrodt Inc.) v. U.S. Food and Drug Administration and United States of America.    In November 2014, the FDA reclassified our Methylphenidate ER in the Orange Book: Approved Drug Products with Therapeutic Equivalence ("the Orange Book"). In November 2014, we filed a Complaint in the U.S. District Court for the District of Maryland Greenbelt Division against the FDA and the United States (the "MD Complaint") for judicial review of the FDA's reclassification. In July 2015, the court granted the FDA's motion to dismiss with respect to three of the five counts in the MD Complaint and granted summary judgment in favor of the FDA with respect to the two remaining counts (the "MD Order"). On October 18, 2016, the FDA initiated proceedings, proposing to withdraw approval of our ANDA for Methylphenidate ER. On October 21, 2016, the United States Court of Appeals for the Fourth Circuit issued an order placing our appeal of the MD Order in abeyance pending the outcome of the withdrawal proceedings. The parties exchanged documents and in April 2018, we filed our submission in support of our position in the withdrawal proceedings. A potential outcome of the withdrawal proceedings is that our Methylphenidate ER products may lose their FDA approval and have to be withdrawn from the market.

Patent Litigation

        Jazz Pharmaceuticals, Inc. and Jazz Pharmaceuticals Ireland v. Mallinckrodt PLC, Mallinckrodt 2011 Inc. and Mallinckrodt LLC.    In January 2018, Jazz Pharmaceuticals, Inc. and Jazz Pharmaceuticals Ireland (collectively, "Jazz") filed suit in the U.S. District Court for the District of New Jersey against us alleging that we infringed U.S. Patent Nos. 7,668,730, 7,765,106, 7,765,107, 7,895,059, 8,457,988, 8,589,182, 8,731,963, 8,772,306, 9,050,302, and 9,486,426 following receipt of a November 2017 notice from us concerning our submission of an ANDA, containing a Paragraph IV patent certification with the FDA for a competing version of Xyrem. On June 4, 2018, the parties entered into a settlement agreement under which we were granted the non-exclusive right to market a competing sodium oxybate product in the U.S. under our ANDA on or after December 31, 2025, or earlier under certain circumstances.

        Shire Development LLC, Shire LLC and Shire US, Inc. v. SpecGx LLC.    In May 2018, Shire Development LLC, Shire LLC and Shire US, Inc. (collectively "Shire") filed suit in the U.S. District Court for the District of Delaware against us alleging that we infringed U.S. Patent Nos. 6,913,768, 8,846,100, and 9,173,857 following receipt of an April 2018 notice from us concerning our submission of an ANDA, containing a Paragraph IV patent certification with the FDA for a competing version of Mydayis. On January 28, 2019, the parties entered into a settlement agreement under which we were granted the non-exclusive right to market a competing generic version of Mydayis in the U.S. under our ANDA on or after May 10, 2023 (or November 10, 2023 if any pediatric exclusivity is granted by the FDA with respect to the Mydayis product), or earlier under certain circumstances.

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Environmental Remediation and Litigation Proceedings

        We are involved in various stages of investigation and cleanup related to environmental remediation matters at a number of sites, including those described below. The ultimate cost of site cleanup and timing of future cash outlays is difficult to predict, given the uncertainties regarding the extent of the required cleanup, the interpretation of applicable laws and regulations and alternative cleanup methods. We concluded that, as of March 29, 2019, it was probable that we would incur remediation costs in the range of $36.1 million to $86.2 million. We also concluded that, as of March 29, 2019, the best estimate within this range was $61.5 million, of which $1.9 million was included in accrued and other current liabilities and the remainder was included in environmental liabilities on our combined balance sheet at March 29, 2019. While it is not possible at this time to determine with certainty the ultimate outcome of these matters, we believe, given the information currently available, that the final resolution of all known claims, after taking into account amounts already accrued, will not have a material adverse effect on our financial condition, results of operations and cash flows.

        Lower Passaic River, New Jersey.    We and approximately 70 other companies ("Cooperating Parties Group" or "CPG") are parties to a May 2007 Administrative Order on Consent ("AOC") with the Environmental Protection Agency ("EPA") to perform a remedial investigation and feasibility study ("RI/FS") of the 17-mile stretch known as the Lower Passaic River ("the River") Study Area. Our potential liability stems from former operations at Lodi and Belleville, New Jersey.

        In April 2014, the EPA issued a revised Focused Feasibility Study ("FFS"), with remedial alternatives to address cleanup of the lower 8-mile stretch of the River. The EPA estimated the cost for the remediation alternatives ranged from $365.0 million to $3.2 billion and the EPA's preferred approach had an estimated cost of $1.7 billion.

        In April 2015, the CPG presented a draft of the RI/FS of the River to the EPA that included alternative remedial actions for the entire 17-mile stretch of the River.

        On March 4, 2016, the EPA issued the Record of Decision ("ROD") for the lower 8 miles of the River with a slight modification on its preferred approach and a revised estimated cost of $1.38 billion. On October 5, 2016, the EPA announced that Occidental Chemicals Corporation ("OCC") had entered into an agreement to develop the remedial design.

        On August 7, 2018, the EPA finalized a buyout offer of $280,600 with us, limited to its former Lodi facility, for the lower 8 miles of the River. During fiscal 2018, we reduced the accrual associated with this matter by $11.8 million to $26.2 million, which represents our estimate of our remaining liability related to the River.

        Despite the issuance of the revised FFS and ROD by the EPA, the RI/FS by the CPG, and the cash out settlement by the EPA there are many uncertainties associated with the final agreed-upon remediation, potential future liabilities and our allocable share of the remediation. Given those uncertainties, the amounts accrued may not be indicative of the amounts for which we may be ultimately responsible and will be refined as the remediation progresses.

        Occidental Chemical Corp. v. 21st Century Fox America, Inc.    We and approximately 120 other companies were named as defendants in a lawsuit filed on June 30, 2018, by OCC, in which OCC seeks cost recovery and contribution for past and future costs in response to releases and threatened releases of hazardous substances into the lower 8 miles of the River. A former company facility located in Jersey City, NJ (located in Newark Bay) and the former Belleville facility were named in the suit. Due to an indemnification agreement with AVON Inc., we have tendered the liability for the Jersey City site to AVON Inc. and they have accepted. We retain a share of the liability for this suit related to the Belleville facility. A motion to dismiss several of the claims was denied by the court. While it is not possible at this time to determine with certainty the ultimate outcome of this matter, we believe, given

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the information currently available, that the ultimate resolution of all known claims, after taking into account amounts already accrued will not have a material adverse effect on our financial condition, results of operations and cash flows.

        Mallinckrodt Veterinary, Inc., Millsboro, Delaware.    We previously operated a facility in Millsboro, Delaware ("the Millsboro Site") where various animal healthcare products were manufactured. In 2005, the Delaware Department of Natural Resources and Environmental Control found trichloroethylene ("TCE") in the Millsboro public water supply at levels that exceeded the federal drinking water standards. Further investigation to identify the TCE plume in the groundwater indicated that the plume has extended to property owned by a third party near the Millsboro Site. We, and another former owner, have assumed responsibility for the Millsboro Site cleanup under the Alternative Superfund Program administered by the EPA. The companies have entered into three AOCs with the EPA to perform investigations to abate, mitigate or eliminate the release or threat of release of hazardous substances at the Millsboro Site and to conduct an Engineering Evaluation/Cost Analysis ("EE/CA") to characterize the nature and extent of the contamination. In January 2017, the EPA issued its Action Memorandum regarding the EE/CA. While it is not possible at this time to determine with certainty the ultimate outcome of this matter, we believe, given the information currently available, that the ultimate resolution of all known claims, after taking into account amounts already accrued, will not have a material adverse effect on our financial condition, results of operations and cash flows.

        Crab Orchard National Wildlife Refuge Superfund Site, near Marion, Illinois.    Between 1967 and 1982, International Minerals and Chemicals Corporation ("IMC"), a predecessor in interest to our company, leased portions of the Additional and Uncharacterized Sites ("AUS") Operable Unit at the Crab Orchard Superfund Site ("the CO Site") from the government and manufactured various explosives for use in mining and other operations. In March 2002, the DOJ, the U.S. Department of the Interior and the EPA (together, "the Government Agencies") issued a special notice letter to General Dynamics Ordnance and Tactical Systems, Inc. ("General Dynamics"), one of the other potentially responsible parties ("PRPs") at the CO Site, to compel General Dynamics to perform the RI/FS for the AUS Operable Unit. General Dynamics negotiated an AOC with the Government Agencies to conduct an extensive RI/FS at the CO Site under the direction of the U.S. Fish and Wildlife Service. General Dynamics asserted in August 2004 that we are jointly and severally liable, along with approximately eight other lessees and operators at the AUS Operable Unit, for costs associated with alleged contamination of soils and groundwater resulting from historic operations, and the parties have entered into a non-binding mediation process. While it is not possible at this time to determine with certainty the ultimate outcome of this matter, we believe, given the information currently available, that the final resolution of all known claims, after taking into account amounts already accrued, will not have a material adverse effect on our financial condition, results of operations and cash flows.

Products Liability Litigation

        Beginning with lawsuits brought in July 1976, we are named as a defendant in personal injury lawsuits based on alleged exposure to asbestos-containing materials. A majority of the cases involve product liability claims based principally on allegations of past distribution of products containing asbestos. A limited number of the cases allege premises liability based on claims that individuals were exposed to asbestos while on our property. Each case typically names dozens of corporate defendants in addition to our company. The complaints generally seek monetary damages for personal injury or bodily injury resulting from alleged exposure to products containing asbestos. Our involvement in asbestos cases has been limited because we did not mine or produce asbestos. Furthermore, in our experience, a large percentage of these claims have never been substantiated and have been dismissed by the courts. We have not suffered an adverse verdict in a trial court proceeding related to asbestos claims and intends to continue to defend these lawsuits. When appropriate, we settle claims; however,

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amounts paid to settle and defend all asbestos claims have been immaterial. As of March 29, 2019, there were approximately 11,700 asbestos-related cases pending against us.

        We estimate pending asbestos claims, claims that were incurred but not reported and related insurance recoveries, which are recorded on a gross basis on our combined balance sheets. Our estimate of our liability for pending and future claims is based on claims experience over the past five years and covers claims either currently filed or expected to be filed over the next seven years.

        We believe that we have adequate amounts recorded related to these matters. While it is not possible at this time to determine with certainty the ultimate outcome of these asbestos-related proceedings, we believe, given the information currently available, that the ultimate resolution of all known and anticipated future claims, after taking into account amounts already accrued, along with recoveries from insurance, will not have a material adverse effect on our financial condition, results of operations and cash flows.

Other Matters

        We are a defendant in a number of other pending legal proceedings relating to present and former operations, acquisitions and dispositions. We do not expect the outcome of these proceedings, either individually or in the aggregate, to have a material adverse effect on our financial condition, results of operations and cash flows.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The following information should be read in conjunction with our audited combined financial statements and accompanying notes and unaudited condensed combined financial statements and accompanying notes included elsewhere in this information statement. The following discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results could differ materially from those discussed in these forward-looking statements as a result of many factors, including, but not limited to, those discussed under "Risk Factors" and "Cautionary Statement Concerning Forward-Looking Statements."

        Parent historically reported its results based on a "52-53 week" year ending on the last Friday of September. During fiscal 2016, Parent changed its fiscal year-end to the last Friday in December from the last Friday in September. The change in fiscal year became effective for the 2017 fiscal year, which began on December 31, 2016 and ended on December 29, 2017. As a result of this change in fiscal year-end, our audited combined financial statements presented elsewhere herein include fiscal 2017, the period from October 1, 2016 through December 30, 2016, and fiscal 2016 (covering the period from September 26, 2015 through September 30, 2016). Fiscal 2016 consisted of 53 weeks while fiscal 2017 consisted of 52 weeks. The period from October 1, 2016 through December 30, 2016 is referred to herein as "the three months ended December 30, 2016" with the comparable period from September 26, 2015 through December 25, 2015 referred to as "the three months ended December 25, 2015."

Separation from Parent

        In December 2018, Parent announced a plan to spin off the Mallinckrodt Inc. Business into a separate, publicly traded company (which is sometimes referred to as the "Company" for purposes of this Management's Discussion and Analysis of Financial Condition and Results of Operations), as further described under "The Separation." Upon separation, Mallinckrodt Inc. will be the parent company that will own the Mallinckrodt Inc. Business. Mallinckrodt Inc., as presented herein for fiscal 2018, 2017, fiscal 2016 and the three months ended December 30, 2016, represents a combined reporting entity comprising the assets and liabilities used in managing and operating the Mallinckrodt Inc. Business, including subsidiaries, branches and operations of Parent that relate to the Mallinckrodt Inc. Business and that have been or (prior to the distribution) will be transferred to Mallinckrodt Inc. or its subsidiaries.

        Our combined financial statements have been presented on a standalone basis and are derived from the consolidated financial statements of Parent. Our combined financial statements have been prepared in U.S. dollars and in accordance with GAAP and reflect our business as it was historically managed as part of Parent and its subsidiaries prior to completion of the separation. These combined financial statements may not be indicative of our future performance and do not reflect what our results of operations, financial position and cash flows would have been had we operated as an independent, publicly traded company during the periods presented, particularly since many changes will occur in our operations and capitalization as a result of our separation from Parent, as further described elsewhere in this information statement.

        Our combined financial statements include expense allocations for certain functions provided by Parent, including, but not limited to, general corporate and other shared expenses related to manufacturing, research and development, selling and marketing, regulatory, finance, legal, information technology, human resources, communications, employee benefits and incentives, insurance and share-based compensation. Management believes such allocations are reasonable; however, they may not be indicative of the actual expenses we would have incurred had we been operating as a separate, publicly traded company for the periods presented. Note 1 to our unaudited condensed combined financial

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statements and Note 1 to our audited combined financial statements included elsewhere in this information statement provide further information regarding allocated expenses. Currently, we are able to use Parent's purchasing power in procuring various goods and services and have shared economies of scope and scale in vendor relationships. Following the separation, we will perform these functions using our own resources or purchased services. For an interim period, however, some of these functions will continue to be provided by Parent under the transition services agreement described elsewhere in this information statement. As a standalone company, the terms and prices on which such services are rendered may differ from the terms and prices in effect prior to completion of the separation. We will also incur additional costs associated with being a separate, publicly traded company. These additional anticipated costs are not reflected in our historical combined financial statements. In the first full fiscal year following the completion of the separation, we estimate these operating costs will be approximately $10.0 million to $20.0 million higher than the general corporate expenses historically allocated from Parent.

Overview

        We are a company focused on providing our customers high-quality complex generic pharmaceutical products and APIs. We use our specialized characterization, development, formulation, and synthetic and analytical chemistry expertise to develop and manufacture a range of pharmaceutical products and APIs. Our products include: immediate and extended-release tablets and capsules; oral solutions; immediate and extended-release oral suspensions; dispersible tablets; orally disintegrating tablets; transdermal patches; and intramuscular, subcutaneous and intravenous injectable products.

        Our business is managed as a single segment consisting of complex generics pharmaceuticals and APIs. The single-segment determination aligns with how the financial information will be viewed by the Chief Executive Officer (our chief operating decision maker) for the purposes of making resource allocation decisions and assessing the performance of the business.

        We sell our complex generic pharmaceutical products primarily to distributors who subsequently sell our products to retail pharmacy chains, independent pharmacies, government entities, hospitals, hospice providers and long-term care providers. Those entities then dispense our complex generic dosage products to patients. We sell and distribute API products to our customer base that includes pharmaceutical companies, contract manufacturers and other associated industrial customers. We also utilize our APIs for internal drug product development. In some regions of the world, especially in Asia, we use authorized distributors to sell our API products. We also manufacture products for third parties under contract.

        For further discussion of our business and products, refer to the section of this information statement entitled "Business."

Business Factors Influencing the Results of Operations

Products

        After experiencing contraction over the last several years, we expect to return to growth in fiscal 2019, primarily driven by recapture of market share in specialty generic products. During the three months ended March 29, 2019, our net sales increased $3.7 million, compared with the three months ended March 30, 2018. Our net sales were $718.9 million, $869.6 million, $1,092.0 million and $229.8 million in fiscal 2018, 2017, 2016 and the three months ended December 30, 2016, respectively, which reflected customer consolidation and increased generic product approvals leading to increased competition.

        We participate in the global pharmaceutical market through the development, manufacturing, sale and distribution of small molecule APIs and finished generic drugs. Global production of APIs has

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increasingly moved from the U.S. and Western Europe to India, China and other lower-cost regions. Our status as the only supplier of acetaminophen in the North American and European regions, coupled with our product quality, service, history in controlled substance APIs and a developed and growing customer base, gives us a competitive advantage that allows us to compete despite significant ongoing downward price pressures globally.

        The U.S. generic market in general is growing overall in volume, but has been declining in value over the past several years due to pricing pressure. Hydrocodone, oxycodone and other controlled substances products have experienced significant volume declines due to continued downward pressure on the use of opioids in the U.S. Despite this market contraction, acetaminophen and opioids are still viewed as the standard of care for many types of pain. Pain management represents the second largest therapeutic area in the U.S., based upon prescriptions dispensed, with pain medications accounting for approximately one out of every 11 dispensed prescriptions in 2018. We expect the decline in usage rates for opioids in the U.S. to continue, stabilizing at levels consistent with historical prescribing patterns and aligning with treatment guidelines being developed by the medical community. Globally, we expect the use of acetaminophen and opioids to trend with population rates for the foreseeable future.

Opioid-Related Matters

        As a result of the greater awareness of the public health issue of opioid abuse, there has been increased scrutiny of, and investigation into, the commercial and order monitoring practices of opioid manufacturers, distributors and others in the supply chain by state and federal agencies. We, along with other opioid manufacturers and others in the supply chain, have been the subject of federal and state government investigations and enforcement actions, as well as lawsuits by private parties, focused on the misuse and abuse of opioid medications in the U.S. Similar investigations, lawsuits and other actions may be initiated in the future. We will continue to incur significant legal costs in defending these matters and could in the future be required to pay significant amounts as a result of fines, penalties, settlements or judgments. Such litigation and related matters are described under "Risk Factors" and in Note 13 to our unaudited condensed combined financial statements and Note 19 to our audited combined financial statements included elsewhere in this information statement.

Results of Operations

Three Months Ended March 29, 2019, Compared with Three Months Ended March 30, 2018

Net Sales

        Net sales by geographic area are as follows (dollars in millions):

 
  Three Months Ended    
 
 
  March 29,
2019
  March 30,
2018
  Percentage
Change
 

U.S.

  $ 148.6   $ 148.2     0.3 %

Europe

    33.9     29.9     13.4  

Other

    3.9     4.6     (15.2 )

Net sales

  $ 186.4   $ 182.7     2.0  

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        Net sales by key products are as follows (dollars in millions):

 
  Three Months Ended    
 
 
  March 29,
2019
  March 30,
2018
  Percentage
Change
 

Acetaminophen (API)

  $ 46.2   $ 49.4     (6.5 )%

Hydrocodone (API) and hydrocodone-containing tablets

    17.4     13.9     25.2  

Oxycodone (API) and oxycodone-containing tablets

    16.5     16.6     (0.6 )

Other controlled substances

    94.2     89.0     5.8  

Other

    12.1     13.8     (12.3 )

Net sales

  $ 186.4   $ 182.7     2.0  

        Net sales during the three months ended March 29, 2019 increased $3.7 million, or 2.0%, to $186.4 million, compared with $182.7 million during the three months ended March 30, 2018. This increase was driven by increases in other controlled substances and hydrocodone-related products of $5.2 million and $3.5 million, respectively, primarily driven by share recapture. These increases were partially offset by decreases in acetaminophen and other products of $3.2 million and $1.7 million, respectively.

Operating Income

        Gross profit.    Gross profit for the three months ended March 29, 2019 increased $0.1 million, or 0.1%, to $68.8 million, compared with $68.7 million during the three months ended March 30, 2018. Gross profit margin was 36.9% for the three months ended March 29, 2019, compared with 37.6% for the three months ended March 30, 2018.

        Selling, general and administrative expenses.    SG&A expenses for the three months ended March 29, 2019 were $53.4 million, compared with $33.3 million for the three months ended March 30, 2018, an increase of $20.1 million, or 60.4%. This increase primarily related to higher legal expense related to opioid litigation defense costs and higher professional fees, partially offset by cost benefits gained from restructuring actions. SG&A expenses were 28.6% of net sales for the three months ended March 29, 2019 and 18.2% of net sales for the three months ended March 30, 2018.

        Research and development expenses.    R&D expenses decreased $10.2 million, or 53.1%, to $9.0 million during the three months ended March 29, 2019, compared with $19.2 million during the three months ended March 30, 2018. The decrease was primarily driven by restructuring actions that occurred during fiscal 2018. Current R&D activities include applying our capabilities to develop difficult formulations, utilizing our expertise in working with controlled substances to develop potent products, and expanding both our therapeutic and technology platforms into areas with less competitive pressure. As a percentage of our net sales, R&D expenses were 4.8% and 10.5% for the three months ended March 29, 2019 and March 30, 2018, respectively.

        Separation Costs.    During the three months ended March 29, 2019, we incurred separation costs of $7.7 million primarily related to professional fees and incremental costs incurred to build out the corporate infrastructure of our standalone company. We expect to continue to incur additional separation costs during fiscal 2019.

Non-Operating Items

        Other income, net.    During the three months ended March 29, 2019 and March 30, 2018, we recorded other income, net, of $7.3 million and $3.3 million, respectively. The three months ended March 29, 2019 included $7.5 million of royalty income. The three months ended March 30, 2018

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primarily related to the adjustment of an indemnification obligation related to the Parent's sale of the Nuclear Imaging business.

        Provision for income taxes.    During the three months ended March 29, 2019, we recognized an income tax expense of $3.3 million on net income before income taxes of $6.0 million. The income tax expense for the three months ended March 29, 2019 is comprised of $4.8 million of current tax expense and $1.5 million of deferred tax benefit. During the three months ended March 30, 2018, we recognized an income tax expense of $6.3 million on net income before income taxes of $19.5 million. The income tax expense for the three months ended March 30, 2018 is comprised of $8.5 million of current tax expense and $2.2 million of deferred tax benefit. Our effective tax rate was 55.0% and 32.3% for the three months ended March 29, 2019 and March 30, 2018, respectively. Our effective tax rate for the three months ended March 29, 2019 was most significantly impacted by permanently nondeductible separation costs of $7.7 million. Our effective tax rate for the three months ended March 30, 2018 was most significantly impacted by $2.7 million of tax expense associated with the Tax Cuts and Jobs Act ("TCJA") and a $1.8 million tax benefit associated with adjustments to uncertain tax positions and associated interest and penalties.

Fiscal Year Ended December 28, 2018, Compared with Fiscal Year Ended December 29, 2017

Net Sales

        Net sales by geographic area are as follows (dollars in millions):

 
  Fiscal Year Ended    
 
 
  December 28,
2018
  December 29,
2017
  Percentage
Change
 

U.S. 

  $ 587.8   $ 682.1     (13.8 )%

Europe

    112.7     169.3     (33.4 )

Other

    18.4     18.2     0.01  

Net sales

  $ 718.9   $ 869.6     (17.3 )

        Net sales by key products are as follows (dollars in millions):

 
  Fiscal Year Ended    
 
 
  December 28,
2018
  December 29,
2017
  Percentage
Change
 

Acetaminophen (API)

  $ 192.7   $ 185.5     3.9 %

Hydrocodone (API) and hydrocodone-containing tablets

    65.9     85.3     (22.7 )

Oxycodone (API) and oxycodone-containing tablets

    66.1     88.0     (24.9 )

Other controlled substances

    343.8     412.0     (16.6 )

Other

    50.4     98.8     (49.0 )

Net sales

  $ 718.9   $ 869.6     (17.3 )

        Net sales in fiscal 2018 decreased $150.7 million, or 17.3%, to $718.9 million, compared with $869.6 million in fiscal 2017. The decrease in net sales was driven by a decrease in other controlled substances products of $68.2 million or 16.6%, primarily attributable to a $31.2 million decrease in Methylphenidate ER due to the FDA's 2014 reclassification of these products to therapeutically inequivalent status. Net sales of oxycodone-related products and hydrocodone-related products decreased by $21.9 million and $19.4 million, respectively, due to increased competition and customer consolidation over the last several years, which has resulted in downward pricing pressure. Other products also decreased $48.4 million or 49.0%, primarily due to a $33.8 million decrease from our

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ongoing supply agreement with the acquirer of the Parent's contrast media and delivery systems ("CMDS") business.

Operating Income

        Gross profit.    Gross profit for fiscal 2018 decreased $123.9 million, or 33.8%, to $242.3 million, compared with $366.2 million in fiscal 2017. Gross profit margin was 33.7% for fiscal 2018, compared with 42.1% for fiscal 2017. The decrease in gross profit and gross profit margin was impacted by the previously mentioned decrease in net sales of oxycodone-related products, hydrocodone-related products and other controlled substances due to channel consolidation and increased pricing pressure.

        Selling, general and administrative expenses.    SG&A expenses for fiscal 2018 were $164.3 million, compared with $128.1 million for fiscal 2017, an increase of $36.2 million, or 28.3%. Fiscal 2018 included a net charge of $7.7 million to adjust reserves related to settlement agreements and one-time professional fees of $4.7 million. Fiscal 2017 included one-time professional fees of $13.6 million. The remaining $37.4 million increase was primarily attributable to higher legal expense related to opioid litigation defense costs and higher professional fees, partially offset by lower employee compensation costs and stock compensation expense. SG&A expenses were 22.9% of net sales for fiscal 2018 and 14.7% of net sales for fiscal 2017.

        Research and development expenses.    R&D expenses decreased $9.7 million, or 15.2%, to $54.3 million in fiscal 2018, compared with $64.0 million in fiscal 2017. Current R&D activities include applying our capabilities to develop difficult formulations, utilizing our expertise in working with controlled substances to develop potent products, and expanding both our therapeutic and technology platforms into areas with less competitive pressure. As a percentage of our net sales, R&D expenses were 7.6% and 7.4% in fiscal 2018 and 2017, respectively.

        Separation costs.    During fiscal 2018, we incurred separation costs of $4.8 million primarily related to tax, accounting and other professional fees. We expect to continue to incur additional separation costs in fiscal 2019.

        Impairment charges.    During fiscal 2018, we incurred a $2.0 million impairment of a license associated with a product the Company elected to discontinue.

Non-Operating Items

        Other income (expense).    During fiscal 2018 and fiscal 2017, we recorded other income, net of $35.1 million and other expense, net, of $75.0 million, respectively. Fiscal 2018 included royalty income of $15.5 million, the receipt of $15.0 million of contingent consideration related to the Parent's sale of the Nuclear Imaging business and a refund of $3.4 million of the initial cash contribution related to the settlement of remaining obligations of six defined benefit pension plans that were terminated during fiscal 2016. Fiscal 2017 included a $70.5 million charge from the recognition of previously deferred losses on the settlement of obligations associated with the termination of six defined benefit pension plans. The remaining amounts in both fiscal years were primarily attributable to pension expense.

        Provision for income taxes.    In fiscal 2018, we recognized an income tax expense of $9.6 million on income before income taxes of $52.0 million. The fiscal 2018 income tax expense is comprised of $18.2 million of current tax expense and $8.6 million of deferred tax benefit. In fiscal 2017, we recognized an income tax expense of $16.6 million on income before income taxes of $99.1 million. The fiscal 2017 income tax expense is comprised of $12.0 million of current tax expense and $4.6 million of deferred tax expense which is predominantly related to the impact of the TCJA. Our effective tax rate was 18.4% and 16.8% for fiscal 2018 and 2017, respectively. Our effective tax rate for fiscal 2018 was most significantly impacted by a tax benefit of $3.4 million associated with nonrecurring decreases in valuation allowances, a $2.7 million tax expense associated with the TCJA, and a $2.1 million tax

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benefit associated with adjustments to uncertain tax positions and associated interest and penalties. Our effective tax rate for fiscal 2017 was most significantly impacted by the recognition of $13.5 million of tax benefit associated with the TCJA and $28.7 million of tax benefit associated with the $70.5 million charge associated with the termination and settlement of our funded U.S. pension plans. Finally, the remaining difference in the effective rates can be attributed to the TCJA's reduction to the U.S. federal corporate statutory rate from 35% in fiscal 2017 to 21% by the end of fiscal 2018.

Fiscal Year Ended December 29, 2017, Compared with Fiscal Year Ended September 30, 2016

Net Sales

        Net sales by geographic area are as follows (dollars in millions):

 
  Fiscal Year Ended    
 
 
  December 29,
2017
  September 30,
2016
  Percentage
Change
 

U.S. 

  $ 682.1   $ 931.8     (26.8 )%

Europe

    169.3     142.0     19.2  

Other

    18.2     18.2      

Net sales

  $ 869.6   $ 1,092.0     (20.4 )

        Net sales by key products are as follows (dollars in millions):

 
  Fiscal Year Ended    
 
 
  December 29,
2017
  September 30,
2016
  Percentage
Change
 

Acetaminophen (API)

  $ 185.5   $ 169.1     9.7 %

Hydrocodone (API) and hydrocodone-containing tablets

    85.3     146.5     (41.8 )

Oxycodone (API) and oxycodone-containing tablets

    88.0     139.9     (37.1 )

Other controlled substances

    412.0     543.9     (24.3 )

Other

    98.8     92.6     6.7  

Net sales

  $ 869.6   $ 1,092.0     (20.4 )

        Net sales in fiscal 2017 decreased $222.4 million, or 20.4%, to $869.6 million, compared with $1,092.0 million in fiscal 2016. This decrease was driven by decreases of $131.9 million, $61.2 million and $51.9 million in net sales of Other controlled substances, hydrocodone-related products and oxycodone-related products, respectively, primarily due to increased competition and customer consolidation, which has resulted in downward pricing pressure. The Other controlled substances' decrease was driven by a $31.8 million decrease in Methylphenidate extended-release ("ER"), primarily attributable to the 2014 FDA reclassification of these products to therapeutically inequivalent status; a Hydromorphone ER decrease of $30.2 million, due to increased competition and customer consolidation; and a $23.5 million, or 91.9%, decrease in EXALGO® (hydromorphone HCl) ER tablets driven by lower volumes. These decreases were partially offset by an increase of $16.4 million in net sales of Acetaminophen (API), primarily attributable to strong demand and stable pricing. In addition, overall net sales growth during fiscal 2017 was negatively impacted by the extra selling week during fiscal 2016.

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Operating Income

        Gross profit.    Gross profit for fiscal 2017 decreased $245.1 million, or 40.1%, to $366.2 million, compared with $611.3 million in fiscal 2016. Gross profit margin was 42.1% for fiscal 2017, compared with 56.0% for fiscal 2016. The decrease in gross profit and gross profit margin was impacted by the $222.4 million decrease in net sales, due to channel consolidation and increased pricing pressure.

        Selling, general and administrative expenses.    SG&A expenses for fiscal 2017 were $128.1 million, compared with $184.4 million for fiscal 2016, a decrease of $56.3 million, or 30.5%. Fiscal 2017 included one-time professional fees of $13.6 million, and fiscal 2016 included a charge of $15.0 million to adjust our reserve related to a settlement agreement entered into with the DEA. The remaining $54.9 million decrease consisted of various factors, including lower employee compensation costs and professional and legal fees. SG&A expenses were 14.7% of net sales for fiscal 2017 and 16.9% of net sales for fiscal 2016.

        Research and development expenses.    R&D expenses decreased $28.1 million, or 30.5%, to $64.0 million in fiscal 2017, compared with $92.1 million in fiscal 2016. The decrease was driven by the commencement of a portfolio-streamlining initiative in fiscal 2017 focused on operational improvements to enhance the value of the current pipeline, which resulted in cost savings. Current R&D activities include applying our capabilities to develop difficult formulations, utilizing our expertise in working with controlled substances to develop potent products, and expanding both our therapeutic and technology platforms into areas with less competitive pressure. As a percentage of our net sales, R&D expenses were 7.4% and 8.4% in fiscal 2017 and 2016, respectively.

Non-Operating Items

        Other expense, net.    During fiscal 2017 and fiscal 2016, we recorded other expense, net, of $75.0 million and $11.1 million, respectively. Fiscal 2017 included a $70.5 million charge from the recognition of previously deferred losses on the settlement of obligations associated with the termination of six defined benefit pension plans. The remaining amounts in both fiscal years were primarily attributable to pension expense.

        Provision for income taxes.    In fiscal 2017, we recognized an income tax expense of $16.6 million on income before income taxes of $99.1 million. The fiscal 2017 income tax expense is comprised of $12.0 million of current tax expense and $4.6 million of deferred tax expense. In fiscal 2016, income tax expense was $105.5 million on income before income taxes of $323.7 million. The fiscal 2016 income tax expense is comprised of $94.4 million of current tax expense and $11.1 million of deferred tax expense. Our effective tax rate was 16.8% and 32.6% for fiscal 2017 and 2016, respectively. Our effective tax rate for fiscal 2017 was most significantly impacted by the recognition of $13.5 million of tax benefit associated with the TCJA and $28.7 million of tax benefit associated with the $70.5 million charge resulting from the termination and settlement of our funded U.S. pension plans. Our effective tax rate for fiscal 2016 was most significantly impacted by $13.3 million of tax benefit associated with adjustments to uncertain tax positions and associated interest and penalties.

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Three Months Ended December 30, 2016, Compared with Three Months Ended December 25, 2015

Net Sales

        Net sales by geographic area are as follows (dollars in millions):

 
  Three Months Ended    
 
 
  December 30,
2016
  December 25,
2015
  Percentage
Change
 

U.S. 

  $ 188.9   $ 228.0     (17.1 )%

Europe

    36.6     32.3     13.3  

Other

    4.3     6.1     (29.5 )

Net sales

  $ 229.8   $ 266.4     (13.7 )

        Net sales by key products are as follows (dollars in millions):

 
  Three Months Ended    
 
 
  December 30,
2016
  December 25,
2015
  Percentage
Change
 

Acetaminophen (API)

  $ 40.8   $ 37.8     7.9 %

Hydrocodone (API) and hydrocodone-containing tablets

    23.2     36.7     (36.8 )

Oxycodone (API) and oxycodone-containing tablets

    27.2     32.5     (16.3 )

Other controlled substances

    117.4     140.6     (16.5 )

Other

    21.2     18.8     12.8  

Net sales

  $ 229.8   $ 266.4     (13.7 )

        Net sales during the three months ended December 30, 2016 decreased $36.6 million, or 13.7%, to $229.8 million, compared with $266.4 million during the three months ended December 25, 2015. This decrease was driven by decreases of $23.2 million, $13.5 million and $5.3 million in net sales of Other controlled substances, hydrocodone-related products and oxycodone-related products, respectively, primarily due to increased competition and customer consolidation, which has resulted in downward pricing pressure. In addition, the net sales from Other controlled substances decreased in large part due to a $9.2 million decrease in net sales of Methylphenidate ER, which was primarily attributable to the FDA's 2014 reclassification of these products to therapeutically inequivalent status. These decreases were partially offset by a $3.0 million increase in net sales of Acetaminophen (API) primarily attributable to strong demand and stable pricing.

Operating Income

        Gross profit.    Gross profit for the three months ended December 30, 2016 decreased $43.7 million, or 28.0%, to $112.2 million, compared with $155.9 million during the three months ended December 25, 2015. Gross profit margin was 48.8% for the three months ended December 30, 2016, compared with 58.5% for the three months ended December 25, 2015. The decrease in gross profit and gross profit margin was attributable to the $36.6 million decrease in net sales due to increased pricing pressure.

        Selling, general and administrative expenses.    SG&A expenses for the three months ended December 30, 2016 were $40.4 million, compared with $48.0 million for the three months ended December 25, 2015, a decrease of $7.6 million, or 15.8%. This decrease consisted of various factors, including lower employee compensation costs and legal and professional fees. SG&A expenses were 17.6% of net sales for the three months ended December 30, 2016 and 18.0% of net sales for the three months ended December 25, 2015.

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        Research and development expenses.    R&D expenses increased $2.5 million, or 11.7%, to $23.8 million during the three months ended December 30, 2016, compared with $21.3 million during the three months ended December 25, 2015. R&D activities include applying our capabilities to develop difficult formulations, utilizing our expertise in working with controlled substances to develop potent products, and expanding both our therapeutic and technology platforms into areas with less competitive pressure. As a percentage of our net sales, R&D expenses were 10.4% and 8.0% for the three months ended December 30, 2016 and December 25, 2015, respectively.

        Impairment charges.    During the three months ended December 30, 2016, we recorded a full impairment charge of $207.0 million associated with our goodwill and a $7.3 million impairment of a license associated with a product the Company elected to discontinue.

Non-Operating Items

        Other expense, net.    During the three months ended December 30, 2016 and December 25, 2015, we recorded other expense, net, of $46.1 million and $0.6 million, respectively. The three months ended December 30, 2016 included a charge of $45.0 million associated with the recognition of previously deferred pension related losses upon lump sum distribution to current and former employees under our pension plan termination. The remaining amounts in both periods were primarily attributable to pension expense.

        (Benefit from) provision for income taxes.    Income tax benefit was $3.1 million on a loss before income taxes of $212.4 million for the three months ended December 30, 2016. For the three months ended December 30, 2016, income tax benefit is comprised of $1.6 million of current tax benefit and $1.5 million of deferred tax benefit. Income tax expense was $30.0 million on income before income taxes of $85.9 million for the three months ended December 25, 2015. For the three months ended December 25, 2015, income tax expense is comprised of $27.2 million of current tax expense and $2.8 million of deferred tax expense. Our effective tax rates were 1.5% and 34.9% for the three months ended December 30, 2016 and December 25, 2015, respectively. The effective tax rate for the three months ended December 30, 2016 was significantly impacted by receiving only $0.6 million of tax benefit associated with the $207.0 million goodwill impairment. The effective tax rate for the three months ended December 25, 2015 was significantly impacted by $1.1 million of tax benefit associated with uncertain tax positions and associated interest and penalties.

Liquidity and Capital Resources

        Significant factors driving our liquidity position include cash flows generated from operating activities and capital expenditures. Historically, we have generated and expect to continue to generate positive cash flow from operations. As part of Parent, our cash is swept regularly by Parent. Parent also funds our operating and investing activities as needed. Cash flows related to financing activities reflect changes in Parent's investments in us. Transfers of cash to and from Parent are reflected as a component of parent company investment within parent company equity on our combined balance sheets. As discussed further under "Capitalization," cash and cash equivalents held by Parent at the corporate level or part of centralized cash management have not been allocated to us.

        Subsequent to the separation, we will no longer participate in cash management and funding arrangements with Parent. Our ability to fund our capital needs will be affected by our ongoing ability to generate cash from operations and access to capital markets. We believe that our future cash from operations, borrowing capacity under the asset-backed revolving credit facility that we anticipate entering into in connection with the separation, and access to capital markets will provide adequate resources to fund our working capital needs, capital expenditures and strategic investments.

        In connection with the separation, we intend to enter into a [          ]-year asset-backed revolving credit facility with a borrowing capacity of up to $[          ] million.

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        We expect our capital expenditures in fiscal 2019 to be approximately $30.0 million, which we intend to fund with cash generated from operations.

        A summary of our cash flows from operating, investing and financing activities is provided in the following table (dollars in millions):

 
  Three Months Ended   Fiscal Year Ended   Three Months Ended  
 
  March 29, 2019   March 30, 2018   December 28,
2018
  December 29,
2017
  September 30,
2016
  December 30,
2016
  December 25,
2015
 

Net cash provided by (used in):

                                           

Operating activities

  $ 19.6   $ (4.2 ) $ 33.5   $ 159.7   $ 316.7   $ 81.5   $ 136.0  

Investing activities

    (7.8 )   (7.8 )   (48.5 )   (61.8 )   (90.5 )   (32.6 )   (15.8 )

Financing activities

    (11.5 )   7.2     15.0     (97.1 )   (226.5 )   (44.2 )   (120.7 )

Net increase (decrease) in cash and cash equivalents

  $ 0.3   $ (4.8 ) $   $ 0.8   $ (0.3 ) $ 4.7   $ (0.5 )

Operating Activities

        Net cash provided by operating activities of $19.6 million for the three months ended March 29, 2019 was primarily attributable to net income, as adjusted for non-cash items, partially offset by a $0.9 million outflow from net investment in working capital. The working capital outflow was primarily driven by a net outflow of $15.9 million related to other assets and liabilities and a $10.2 million decrease in accounts payable, partially offset by a $29.9 million decrease in accounts receivable, net.

        Net cash used in operating activities of $4.2 million for the three months ended March 30, 2018 was primarily attributable to a $35.1 million outflow from net investment in working capital, partially offset by net income, as adjusted for non-cash items. The working capital outflow was primarily driven by a $13.9 million decrease in accrued and other current liabilities, a $12.9 million increase in accounts receivable, net, a net outflow of $7.0 million related to other assets and liabilities and a $6.3 million outflow related to inventory balances, partially offset by an increase in accounts payable of $5.0 million.

        Net cash provided by operating activities of $33.5 million for fiscal 2018 was primarily attributable to net income, as adjusted for non-cash items, partially offset by an $80.1 million outflow from net investment in working capital. The working capital outflow primarily included a $72.5 million increase in accounts receivable, net, and a net outflow of $33.4 million related to other assets and liabilities, partially offset by a $27.8 million increase in accrued and other current liabilities. The increase in accounts receivable is primarily attributable to higher levels of gross accounts receivable due to a shift in customer mix and the timing of receipts.

        Net cash provided by operating activities of $159.7 million for fiscal 2017 was primarily attributable to net income, as adjusted for non-cash items, partially offset by a $19.5 million outflow from net investment in working capital. The working capital outflow primarily included an outflow related to a cash payment of $35.0 million for settlement of the DEA investigation, partially offset by a $15.5 million net inflow related to other assets and liabilities.

        Net cash provided by operating activities of $316.7 million for fiscal 2016 was primarily attributable to net income, as adjusted for non-cash items, partially offset by a $15.6 million outflow from net investment in working capital. The working capital outflow was primarily driven by a $21.4 million outflow related to inventory balances, a $15.3 million outflow from net tax related balances and a net outflow of $3.6 million related to other assets and liabilities, partially offset by a $24.7 million decrease in accounts receivable.

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        Net cash provided by operating activities of $81.5 million for the three months ended December 30, 2016 was primarily attributable to net loss, as adjusted for non-cash items, in addition to a $56.2 million inflow from net investment in working capital. The working capital inflow was primarily driven by a $36.4 million decrease in accounts receivable, net, and a net inflow of $28.8 million related to other assets and liabilities, partially offset by a $9.0 million outflow related to inventory balances. The increase in other assets and liabilities primarily resulted from the recognition of a $45.0 million charge associated with our pension settlement partially offset by payment of annual employee cash bonuses.

        Net cash provided by operating activities of $136.0 million for the three months ended December 25, 2015 was primarily attributable to net income, as adjusted for non-cash items, in addition to a $53.0 million inflow from net investment in working capital. The working capital inflow was primarily driven by a $46.7 million decrease in accounts receivable, an $11.1 million net inflow related to other assets and liabilities and an $8.2 million increase in accounts payable, partially offset by a $13.0 million outflow related to inventory balances. The decrease in accounts receivable, net, was primarily due to timing of annual customer incentive payments and sales within the quarter.

Investing Activities

        Net cash used in investing activities was $7.8 million for both the three months ended March 29, 2019 and March 30, 2018. Capital expenditures decreased $2.6 million to $7.9 million during the three months ended March 29, 2019 as compared to $10.5 million during the three months ended March 30, 2018. This decrease was partially offset by a $2.6 million decrease in proceeds from the sale of property, plant and equipment.

        Net cash used in investing activities decreased to $48.5 million for fiscal 2018, compared with $61.8 million used in investing activities for fiscal 2017, primarily attributable to a decrease in capital expenditures.

        Net cash used in investing activities decreased to $61.8 million for fiscal 2017, compared with $90.5 million used in investing activities for fiscal 2016, primarily attributable to a decrease in capital expenditures.

        Net cash used in investing activities increased to $32.6 million for the three months ended December 30, 2016, compared with $15.8 million used in investing activities for the three months ended December 25, 2015, primarily attributable to an increase in capital expenditures.

Financing Activities

        Net cash used in financing activities was $11.5 million for the three months ended March 29, 2019, compared with $7.2 million provided by financing activities for the three months ended March 30, 2018. This change resulted from a change in net transfers (to) from Parent due to a $23.8 million increase in operating cash flow.

        Net cash provided by financing activities was $15.0 million for fiscal 2018, compared with $97.1 million used in financing activities for fiscal 2017. This change resulted from a change in net transfers from (to) Parent due to a $126.2 million decrease in operating cash flow.

        Net cash used in financing activities was $97.1 million for fiscal 2017, compared with $226.5 million used in financing activities for fiscal 2016. This resulted from a decrease in net transfers to Parent. Net transfers to Parent were lower in fiscal 2017 due to a $157.0 million decrease in operating cash flow.

        Net cash used in financing activities was $44.2 million for the three months ended December 30, 2016, compared with $120.7 million net cash used in financing activities for the three months ended December 25, 2015. This resulted from a decrease in net transfers to Parent. Net transfers to Parent

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were lower in the three months ended December 30, 2016 due to a $54.5 million decrease in operating cash flow.

Inflation

        Inflationary pressures have had an adverse effect on us through higher raw material and fuel costs. We may enter into commodity swap contracts to mitigate the impact of rising prices in the future. If these contracts are not effective or we are not able to achieve price increases on our products sufficient to compensate for any adverse movements in currency exchange rates, we may be impacted by these increased costs.

Concentration of Credit and Other Risks

        Financial instruments that potentially subject us to concentrations of credit risk primarily consist of accounts receivable. We generally do not require collateral from customers. A portion of our accounts receivable outside of the U.S. includes sales to government-owned or supported healthcare systems in several countries, which are subject to payment delays. Payment is dependent upon the financial stability and creditworthiness of those countries' national economies.

Capitalization

        Cash and cash equivalents held by Parent at the corporate level or part of centralized cash management have not been allocated to us for any of the periods presented. In addition, Parent's external debt and related interest expense have not been allocated to us since, following consummation of the planned separation, neither we nor any of our post-separation subsidiaries will be an obligor of such debt and none of the assets of such entities will be pledged as collateral for such debt. However, certain of our post-separation subsidiaries are currently guarantors of certain debt facilities of Parent and certain of the assets of such entities have been pledged as collateral to certain of such debt.

Dividends

        We currently do not anticipate paying any cash dividends for the foreseeable future, as we intend to retain earnings to finance acquisitions, R&D and the operation and expansion of our business. The recommendation, declaration and payment of dividends in the future by us will be subject to the sole discretion of our board of directors and will depend upon many factors, including our financial condition, earnings, capital requirements of our operating subsidiaries, covenants associated with certain of our debt obligations, legal requirements, regulatory constraints and other factors deemed relevant by our board of directors. Moreover, if we determine to pay dividends in the future, there can be no assurance that we will continue to pay such dividends.

Commitments and Contingencies

Contractual Obligations

        The following table summarizes our contractual obligations as of December 28, 2018 (dollars in millions):

 
  Payments Due by Period  
 
  Total   Less than
1 year
  1 - 3
years
  3 - 5
years
  More than
5 years
 

Total contractual obligations(1)

  $ 20.2   $ 4.7   $ 6.8   $ 6.5   $ 2.2  

(1)
Represents operating lease obligations as there were no material purchase obligations as of December 28, 2018.

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        The preceding table does not include other liabilities of $214.3 million, primarily consisting of obligations under our pension and postretirement benefit plans, unrecognized tax benefits for uncertain tax positions and related accrued interest and penalties, environmental liabilities and asset retirement obligations, because the timing of their future cash outflow is uncertain. The most significant of these liabilities are discussed below.

        We are obligated to pay royalties under certain agreements with third parties. During fiscal 2018, 2017, fiscal 2016 and the three months ended December 30, 2016, we made payments under these arrangements of $2.6 million, $3.8 million, $6.6 million and $1.7 million, respectively. The timing and amounts to be paid in future periods are uncertain, as they are dependent upon generating net sales in future periods.

        As of December 28, 2018, we had net unfunded pension and postretirement benefit obligations of $23.5 million and $39.8 million, respectively. The timing and amounts of long-term funding requirements for pension and postretirement obligations are uncertain. We do not anticipate making material involuntary contributions in fiscal 2019, but may elect to make voluntary contributions to our defined pension plans or our postretirement benefit plans during fiscal 2019. We settled all outstanding obligations associated with our six U.S. qualified pension plans during the first half of fiscal 2017 and made contributions of $62.3 million associated with the unfunded portion of these obligations.

        We are involved in various stages of investigation and cleanup related to environmental remediation matters at a number of sites. The ultimate cost of cleanup and timing of future cash outlays is difficult to predict given uncertainties regarding the extent of the required cleanup, the interpretation of applicable laws and regulations and alternative cleanup methods. As of March 29, 2019, we believe that it is probable that we will incur investigation and remediation costs of approximately $61.5 million, of which $1.9 million is included in accrued and other current liabilities and $59.6 million is included in environmental liabilities on our combined balance sheet at March 29, 2019. Note 13 to our unaudited condensed combined financial statements and Note 19 to our audited combined financial statements included elsewhere in this information statement provides additional information regarding environmental matters.

        In connection with Parent's sale of its Intrathecal Therapy business on March 17, 2017 to Piramal Enterprises Limited's subsidiary in the United Kingdom ("U.K."), Piramal Critical Care ("Piramal"), we have the right to receive contingent consideration of up to $32.0 million. Additionally, we have an obligation to reimburse up to $7.3 million of product development expenses incurred by Piramal, of which $3.1 million is included in accrued and other liabilities on our combined balance sheet at December 28, 2018.

        In connection with Parent's sale of its Nuclear Imaging business on January 27, 2017 to IBA Molecular ("IBAM"), we have the right to receive contingent consideration of up to $77.0 million in the form of cash and vendor preferred equity certificates. Additionally, we have an indemnification obligation related to tax matters, which had a balance of $3.7 million at December 28, 2018 and is included in other liabilities on our combined balance sheet.

        In connection with Parent's sale of its CMDS business on November 27, 2015 to Guerbet S.A., we have a post-divestiture supply agreement covering certain products and an indemnification obligation related to tax and other matters. The balance of the indemnification obligation as of December 28, 2018 was $7.6 million, which is included in other liabilities on our combined balance sheet.

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Legal Proceedings

        We are subject to various legal proceedings and claims, including present and former operations, including those described in "Business—Legal Proceedings" and in Note 13 to our unaudited condensed combined financial statements and Note 19 to our audited combined financial statements included elsewhere in this information statement. We believe that these legal proceedings and claims likely will be resolved over an extended period of time. Although it is not feasible to predict the outcome of these matters, management is of the opinion that their ultimate resolution should not have a material adverse effect on our business, financial condition, results of operations and cash flows.

Guarantees

        We are subject to various risks and liabilities with respect to representations, warranties and indemnities, including unknown damage to assets, environmental risks involved in the sale of real estate, liability to investigate and remediate environmental contamination at waste disposal sites and manufacturing facilities, and unidentified tax liabilities related to periods prior to disposition. The Company assesses the probability of potential liabilities related to such representations, warranties and indemnities and adjusts potential liabilities as a result of changes in facts and circumstances. The Company believes, given the information currently available, that their ultimate resolution will not have a material adverse effect on its business, financial condition, results of operations and cash flows. These representations, warranties and indemnities are discussed in Note 13 to our unaudited condensed combined financial statements and Note 19 to our audited combined financial statements included elsewhere in this information statement.

Off-Balance Sheet Arrangements

        In connection with the separation, we expect that Parent and the Company will provide cross-indemnities principally designed to place financial responsibility of the obligations and liabilities of our business with us and financial responsibility for the obligations and liabilities of Parent's remaining business with Parent, among other indemnities.

Critical Accounting Policies and Estimates

        The combined financial statements have been prepared in U.S. dollars and in accordance with GAAP. The preparation of the combined financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. The following accounting policies are based on, among other things, judgments and assumptions made by management that include inherent risks and uncertainties. Management's estimates are based on the relevant information available at the end of each period.

Revenue Recognition

    Product Sales Revenue

        We principally sell products through independent distributors who resell our products to retail pharmacies, institutions and end user customers. We also enter into arrangements with indirect customers, such as health care providers and payers, wholesalers, government agencies, institutions, and managed care organizations to establish contract pricing for certain products that provide for government-mandated and/or privately-negotiated rebates, sales incentives, chargebacks, distribution service agreement fees, fees for services and administration fees, and discounts with respect to the purchase of our products.

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    Reserve for Variable Considerations

        Product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established. These reserves result from estimated chargebacks, rebates, product returns and other sales deductions that are offered within contracts between us and our customers, health care providers and payers relating to the sales of our products. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to the customer) or a current liability (if the amount is payable to a party other than a customer). Where appropriate, these estimates take into consideration a range of possible outcomes which are probability-weighted for relevant factors such as our historical experience, estimated future trends, estimated customer inventory levels, current contracted sales terms with customers, level of utilization of our products and other competitive factors. Overall, these reserves reflect our best estimate of the amount of consideration to which it is entitled based on the terms of the contract. The amount of variable consideration which is included in the transaction price may be constrained (reduced), and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. We adjust reserves for chargebacks, rebates, product returns and other sales deductions to reflect differences between estimated and actual experience. Such adjustments impact the amount of net sales recognized in the period of adjustment.

        The following table reflects activity in our sales reserve accounts (dollars in millions):

 
  Rebates and
Chargebacks
  Product
Returns
  Other Sales
Deductions
  Total  

Balance at September 25, 2015

  $ 233.0   $ 44.2   $ 16.6   $ 293.8  

Provisions

    1,682.7     8.3     66.2     1,757.2  

Payments or credits

    (1,647.6 )   (17.6 )   (71.2 )   (1,736.4 )

Balance at September 30, 2016

    268.1     34.9     11.6     314.6  

Provisions

    419.0     3.9     15.6     438.5  

Payments or credits

    (406.6 )   (11.1 )   (17.9 )   (435.5